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Transcription

1 Annual Report 2010

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3 1 D(#&H9)0*())&7027%0276) Wessanen Piet Hein Merckens started as CEO on 1 June 2010 Focus on organic food as the core business of the Company Development of roadmap to guide strategy Divestments of Tree of Life, Inc. and PANOS Brands completed Wessanen Europe Grocery and Wessanen Europe HFS Organic food grew around 2% in 2010 in markets where we are active Autonomous revenue growth Grocery amounted to 3.4% Autonomous revenue growth HFS amounted to (3.5)% Investments in advertising & promotion, ICT and sales force to further strengthen our operations Frozen Foods Revitalisation of the Beckers brand progressing well Beckers successful with innovations American Beverage Corporation (ABC) Successful turnaround with improved operational efficiency Contents Introduction Key business highlights 1 Key financial highlights 2 Wessanen at a glance 4 Letter from the CEO 6 Strategy Our organic food, 9 your natural choice Market review The world around us 12 Business review Wessanen Europe Grocery 14 Wessanen Europe Health Food Stores 14 Frozen Foods 18 American Beverage Corporation 20 Discontinued operations 22 Report of the Executive Board 23 Financing 28 Principal risks and uncertainties 30 Sustainability 35 Employees 38 Governance Corporate governance Including 40 biographies and management structure Report of the Supervisory Board 49 Remuneration report 53 Financial statements Consolidated financial statements 60 Company financial statements 102 Other information Dividend proposal 106 and subsequent events Independent auditor s report 107 Additional information Financial summary Shareholder information 112 Cautionary statements 116 Introduction Business review Governance Financial statements Additional information

4 2 Key financial highlights Revenue 1 Operating result (EBIT) m 2009: 702.5m 5.3m 2009: m Net result 2 Cash flow from operating activities 1-6.1m 2009: m 34.3m 2009: 11.9m Revenue per segment 1 Net debt at year end (in EUR million)! Wessanen Europe Grocery 233.1m!" Wessanen Europe HFS 282.6m!" Frozen Foods 115.8m!" ABC 92.8m FTEs per segment (average) 1 Leverage ratio (net debt/ebitdae)! Wessanen Europe Grocery 437!" Wessanen Europe HFS 815!" Frozen Foods 505!" ABC 458!" Corporate Continuing operations only 2 Attributable to equity holders of Wessanen

5 3 Introduction In EUR millions, unless stated otherwise Income statement Revenue Operating result (EBIT) (44.4) Profit for the period attributable to equity holders of Wessanen (6.1) (219.7) Cash flow Cash flow from operating activities Cash flow from investing activities 1 (14.5) (10.6) Cash flow from financing activities (168.1) (37.6) Statement of financial position Average capital employed Shareholders equity Net debt Ratios Operating result (EBIT) as a % of revenue 0.7% (6.3)% Return on average capital employed (ROCE) 1 2.0% (14.3)% Leverage ratio (net debt/ebitdae) at year end Return on average shareholders equity (3.5)% (72.9)% Share price information (in EUR/share) Equity attributable to equity holders of Wessanen Profit for the period attributable to equity holders of Wessanen 1 (0.06) (1.94) Dividend 0.05 Highest share price Lowest share price Share price at year end Average number of outstanding shares (in thousands) 73,229 67,609 Number of shares outstanding at year end (in thousands) 74,819 67,616 Market capitalisation at year end (in EUR million) Other key data Average number of employees (in FTE) 1 2,276 2,261 Number of employees at year end (in FTE) 1 2,222 2,139 1 Continuing operations only

6 4 Wessanen at a glance E*&NOQR@&'())$*(*&G$)&0*3":5":$6(1&G7(*&S1:0$$*& '())$*(*&)6$:6(1&6"&6:$1(&0*&-T9)6$:1@&3$*$:#&& $*1&"67(:&)((1).=&S:"9*1&NUNM&06&0*6:"193(1&06)&V:)6& 3"*)94(:&5:"1936)@&%0<(&"$64($%&$*1&3"3"$=&'())$*(*& G$)&10)60*290)7(1&G067&67(&606%(&!"#$%&0*&NUNW= Wessanen Europe The European organic food business includes the operations in France, the Benelux, the UK, Germany and Italy. These companies market and distribute a wide range of organic brands, which are marketed via supermarkets, grocery stores, health food stores and other food and catering outlets. In Germany we have two factories for i.a. vegetarian spreads, cooking essentials, honeys, cereals, bars and cookies. In Italy we own a soya milk factory. Besides this, our organic products are sold in other countries through Export as well. As of the fourth quarter 2010, the reporting of Wessanen Europe has been split into Wessanen Europe Grocery and Wessanen Europe Health Food Stores (HFS) to provide clearer focus on these two sales channels, which show different market developments, have different brands and commercial approaches. Channel Country Wessanen Europe Grocery Revenue 233.1m 2009: 223.2m Key brands Wessanen Europe Health Food Stores Revenue 282.6m 2009: 279.5m Key brands France Benelux UK Germany Italy Export

7 5 Introduction Frozen Foods Leading positions in core countries Kallo Foods Hagor-Bioservice/ Foodprints Belgié Bonneterre/Biodistrifrais Tree of Life UK Foodprints Natudis Wessanen Deutschland Allos De Rit Naturfeinkost Tartex/CoSa Naturprodukte Bio Slym Our European Frozen Foods business comprises the activities of Beckers Benelux and Favory Convenience Food Group. These companies manufacture and market a wide variety of frozen convenience food products, ranging from the traditional Dutch frikandel to spring rolls. These products are available at supermarkets and in the out-of-home channel in the Netherlands and Belgium. Revenue 115.8m 2009: 119.6m Distriborg Groupe Allos Bio Slym Bonneterre/Biodistrifrais De Rit Naturfeinkost Distriborg Groupe Foodprints Hagor-Bioservice/Foodprints België Kallo Foods Natudis Tartex/CoSa Naturprodukte Tree of Life UK Wessanen Deutschland Drebber Viadana (MN) Paris Rees Lyon Zeist Wijgmaal Camberley, Surrey Harderwijk Freiburg Newcastle-under-Lyme Bremen American Beverage Corporation (ABC) ABC is one of the leading producers of non-carbonated bottled fruit drinks and cocktail mixers in North America. The company manufactures and markets leading brands of juice drinks and cocktail mixers within both the on- and off-premise channels, including supermarkets, mass merchandisers, convenience stores, liquor stores, bars and restaurants. Revenue 92.8m 2009: 89.7m

8 6 Letter from the CEO LMNM&G$)&$&#($:&";&0*+()64(*6)&6"&)6:(*267(*& $*1&:(+06$%0)(&"9:&3":(&H9)0*())=&P7(&4$0*&6$)<& ;":&'())$*(*&G$)&6"&3"*+(:6&67(&)6:$6(203&37"03()& )(6&$6&67(&(*1&";&LMMU&0*6"&3"*3:(6(&$360"*)&$*1& 0*060$60+()&$3:"))&67(&H9)0*())=!"#"$%&'$&$()*&+$,-$./0*'12*/1'3$ 1,$'1+*/415*/$$ &/6$+*0.1&7.'*$$,8+$9,+*$:8'./*'';< Piet Hein Merckens Chief Executive Officer In 2009 Wessanen took an extensive look at its strategic options for the future. We decided that the most promising area of operations was the European organic food sector where the Company already had a strong presence in the various markets and business channels. However, when I joined Wessanen in April, it became clear to me that the set strategy required refinement, deepening and focus in order to achieve flawless execution. The primary task in that process was to define the roadmap for Wessanen Europe as a whole and for the individual countries. This was crucial in the progress. Because if you do not know where you are going, you will not get there. We strengthened the foundations of the European business and defined our pockets of strengths, knowledge and skills. Moreover, the organisation s structure was adjusted to be better equipped for the transitional phase the Company is going through. The set strategy prompted a number of actions in 2009 and We sold Tree of Life, Inc. and PANOS Brands as well as some smaller operations in We intend to divest ABC, in principle in Exit from the North American marketplace will enable us to focus on our European operations. As we move into 2011, I can see that our strategy is starting to gain traction. Clear pockets of strength are emerging within Wessanen. It is vital that we expand these pockets by deploying our wide-ranging skills and knowledge to best effect. This will help us to exploit the initiatives that will reap the commercial and financial rewards we are seeking. There is still a great deal of work to be done, but I am convinced that the combination of committed people and a clear sight of our objectives will ensure that we will make good progress during the year. Financial performance Our financial performance reflected the main market developments and the investments to revitalise our business in 2010, with revenue rising by 1.4% to EUR 712 million to deliver an operating result of EUR 5 million. The macro-economic environment did not do us any favours, as it depressed consumer confidence across Europe. In these market conditions, the key is to show even more clearly to our consumers the added value that our brands and products offer. On the one hand, costs rose as we increased our spending on marketing, hired more sales people and invested in SAP systems. On the other hand, organic growth was disappointing at (1.3)%, showing the need to drive up volumes. Consumer demand has remained subdued, resulting in lower market growth and fierce competition.

9 7 In 2010, we strongly reduced our debt financing as a result of the divestments of Tree of Life, Inc. and PANOS Brands, as well as through net cash generation. We also issued up to 10% of new shares in March 2010 to strengthen the balance sheet. =,$2&>*$,8+$,+4&/.9$ :+&/6'$2,'1$6*'.+*6$./$?8+,@*;< Introduction Organic food is a growth market Organic food is at the core of our business. It has clear consumer benefits, including the absence of GMO, food additives and artificial pesticides and fertilisers. Its ingredients are pure. Local and European labelling guarantees sustainability throughout the value chain, from seeding through to the moment of consumption. In addition, we work hard to ensure that our organic products are even tastier as well as healthy and affordable. The market for organic food in Europe has been growing strongly for ten years up to Originally, it appealed to a small but loyal group of long-term consumers. Today, organic food is being sold in most supermarkets as mainstream consumers recognise its wide range of benefits. Wessanen has been serving this market for many years and these levels of knowledge and experience give us a strong competitive advantage. Our passion for brands is key. We fully believe that Wessanen is best placed to make our organic brands most desired in Europe. Wessanen Europe: Grocery and HFS During 2010, we developed a clearly defined roadmap which lays out the strategic objectives driving the progress of Wessanen Europe. We will focus primarily on our top-line with the objective of generating sales growth and building market share in our core categories and brands. We will also improve operating margins by increasing gross margins via central sourcing savings, by reducing overhead costs and by putting our strategic plans into action. In addition, we will enhance operational performance and operate an efficient cross-country organisation to leverage our scale and capabilities. For me, Wessanen s future success is built on six important building blocks, which I call our permission to win. They are: Passionate people Pioneering brands Customer partnerships and multichannel approach Network of strategic supplier partnerships European scale Unique expertise and industry authority. Each of these elements has the potential to give us a significant competitive advantage in the marketplace. In addition, we have been active in the various channels for a very long time. The knowledge we gained over the years, in combination with the clear strategy, will help us to get where we are heading for. We are already well on the way to achieving our goals, thanks to the hard work of our people. For example, we have made good progress on brand harmonisation, enhanced brand awareness, centralised sourcing and SAP implementation. But we are travelling on a long road and there is still much work to be done. We need to increase our success rate with innovations, fine-tune our go-to-market approaches, become more efficient in our back office operations and accelerate our sales growth. The strategy is in place and we have a roadmap to guide us. Now, to make our organic brands the most desired in Europe, we must concentrate on a consistent and disciplined execution of the strategies and plans that lie before us. A)$2,2*/1$B$282$:8)'$2*$

10 8 Letter from the CEO Frozen Foods Although 2010 was a challenging year for Frozen Foods, I witnessed numerous positives, like successful new innovations such as Mammoet and Bicky Royal, increased brand awareness and greater efficiencies in the production and supply chain. For 2011, we are working hard on further enhancing both brand awareness and operational excellence. ABC I am very pleased to report that ABC was restored to profitability after a difficult year in The new management team succeeded in improving key business processes and I believe there will be further improvements in the future as advertising and promotions enhance consumer engagement with our brands and products. We are expanding distribution across customers, channels and regions. Our people Since my arrival, I have been tremendously impressed by the spirit of Wessanen s people particularly their entrepreneurial and inspiring zeal and their willingness to co-operate. I share their enthusiasm and belief that we are on the right track. Personally, 2010 has been a special year for me. I joined Wessanen in April, being attracted by the challenge to develop further its organic strategy, the growth of the organic food markets, its Dutch heritage as well as my affinity with organic. After familiarising myself with the Company, the brands and products as well as with numerous suppliers, customers and industry players, we worked hard on refining the strategy during the summer. We made clear choices whilst starting to revitalise the business. I continue to enjoy the enthusiasm and dedication of our people. I would like to thank Frans Koffrie for his valuable contributions as interim CEO. He has been, in close cooperation with the Supervisory Board, the architect of the new group structure and our focus on organic. I am very pleased that he has rejoined the Supervisory Board. His experience and enthusiasm for Wessanen are important assets to us all. Looking ahead Although we are certainly not there yet, I can see real progress. Organic food used to be an ideology, a way of life. Now it is mainstream and poised for further growth. For Wessanen, that is a great opportunity. We enter 2011 as a stronger, more focused business. In my view, this is going to be the year of the breakthrough the year in which Wessanen will show its stakeholders the first positive signs of our potential and how we are going to bring it to fruition. For me, Wessanen is not simply a company with a long and illustrious history going back 245 years. It is also a business with a long and great future ahead of it. Piet Hein Merckens Chief Executive Officer Royal Wessanen nv A)$2,2*/1$B$*/E,)./4$ &$1&'1)$:+*&>-&'1D< Cereals with a distinctive character Our cereals are appreciated for the additives of quinoa and amaranth. These Mexican grains are used in our German Whole Earth breakfast assortment, bars and cookies. Quinoa and amaranth are well-known for the high quality of proteins and as gluten-free ingredients.

11 Strategy Our organic food, your natural choice 9 >:2$*03&;""1&0)&$6&67(&3":(&";&'())$*(*=&'(&1(V*(1& 670)&)6:$6(203&10:(360"*&0*&LMMU&$*1&G(&:(V*(1&$*1& ;"39)(1&06&%$)6&#($:=&'(&*"G&7$+(&$&3%($:&:"$14$5&& 0*&5%$3(&6"&4$<(&"9:&+0)0"*&-6"&4$<(&"9:&":2$*03& H:$*1)&4")6&1()0:(1&0*&89:"5(.&:($%06#=&E6&0)&$%%&& $H"96&$&3"*)0)6(*6&(B(3960"*&";&670)&)6:$6(2#= Introduction We focus on organic food and conduct three business models; brands in Wessanen Europe Grocery and brands as well as wholesale organised in Wessanen Europe HFS. These are managed by a matrix structure. In addition, we have two other segments, ABC and Frozen Foods. ABC s objectives are to build equity of core brands and expand distribution across customers, channels and regions. In 2011, ABC will continue to concentrate on growing sales by improving the brand positioning and visibility, and to further optimise its operational cost structure. In line with our strategic choice to focus on organic food in Europe, we intend to divest ABC, in principle in At Frozen Foods, we are aiming to increase brand awareness and operational excellence. We continue to work on improving sales growth and realising higher operating margins and we believe this segment has potential to improve in these areas. Ultimately, we intend to sell Frozen Foods, although we have yet to decide on a timescale for the divestment. Following a comprehensive review of market opportunities in 2009, Wessanen decided that the Company s future would be on the European organic food market. Accordingly, steps were taken to scale down all of the North American operations. Liberty Richter was sold late in 2009, followed by Tree of Life, Inc. and PANOS Brands in During 2010 we refined the strategy to better align it with developments in the organic food market. This resulted in a focused roadmap which will drive our agenda for the future. An evolving marketplace Historically, organic food has been a niche market, characterised by a relatively small but fiercely loyal group of consumers. Now the picture is changing rapidly. Organic food has reached the mainstream consumer via supermarkets and grocery outlets. The breadth and depth of the organic goods displayed at grocery chains is continuing to grow. Organic is moving from a niche shelf in the store to an image builder for grocery retailers. In the past, organic certification was a differentiator, while it is now becoming more of a table stake. A European logo was introduced in July 2010, next to local certification. The next generation organic products will have to deliver clear consumer benefits instead of being copies of mainstream non-organic products. Pricing will increasingly be based on the perceived value and consumer benefits. In contrast to the past when price sensitivity was low, private label is increasingly becoming the key reference point. Our vision and mission We believe we have a strong proposition for consumers: Organic food is good for you, our living planet and the next generation. By adopting an organic approach, we give our customers and the consumer the opportunity to experience all the benefits of organic food. While the food is made from ingredients that originate from sustainable sources, the supply chain complies with social and ethical standards. Moreover, the products are nutritionally pure and rich in flavour. To be fully successful, we need to make organic food affordable for consumers. Our brands are pioneering and prominent organic brands across Europe, offering a variety of relevant products. Focus is on the growing number of organic mainstream consumers as well as our core consumer base. Strategic objectives Top-line growth Market share gains in core categories and brands Add-on acquisitions Improve EBIT margins Increase gross margins Central sourcing savings Richer product mix Increase capacity utilisation own plants Manage non-core brands for cash Reduce overhead costs Grow our export business and aim to establish footprint in other European countries Improve operational performance / Establish cross-country organisation Raise overall talent bar / Increase employee engagement

12 10 Strategy Our organic food, your natural choice Our vision combines all the above mentioned: To make our organic brands most desired in Europe. Our mission is to make Our organic food, your natural choice. Our business models We conduct three business models: brands in grocery, brands in HFS and HFS wholesale. The grocery channel involves the sourcing, development, marketing and selling of our own brands to grocery retailers. We deliver our products both to distribution centres and directly to stores. Our brands include Bjorg, Whole Earth, Kallo, Zonnatura and Biorganic. We report these activities in the Wessanen Europe Grocery segment. The HFS channel involves the sourcing, development, marketing and selling of our own brands to health food stores. Distribution is either via wholesalers (in Germany) or direct to the stores (France, the Netherlands). Our brands include Bonneterre, Evernat, De Rit, Molenaartje, Ekoland, Allos and Tartex. Wholesale involves the sourcing, category management, sales and distribution to HFS. Focus is on a full-range product portfolio and a high share of products per store. Our operations include Biodistrifrais and Kalisterra in France, Dutch market leader Natudis and fresh distributor Kroon (acquired in April 2010) as well as Hagor in Belgium and Tree of Life in the UK. Brands in HFS and wholesale are reported under Wessanen Europe HFS. Strategic direction chosen In 2009 we defined our strategic direction that would enable us to achieve our goal of becoming the Organic+ food champion. It goes beyond organic certified products and copies of conventional products. Its success depends on delivering clear consumer benefits that differentiate the products in the marketplace. The chosen markets are our core countries today: France, Benelux, UK, Germany and Italy. The strategy focuses on capturing the growing number of organic mainstream consumers, while nurturing the existing core consumer base and building leadership positions on the dedicated shelf and in specialty channels. It also includes building, acquiring and leveraging leading organic brands. Lastly, we aim to become the organic authority towards consumers, trade partners, suppliers and other relevant stakeholders. In 2010 we refined the strategic direction with the decision to concentrate on organic brands in both grocery and health food stores. The playing field is determined by four consumer benefit platforms: Nutrition Taste-indulgence Taste-cooking Basics F8+$2,2*/1$B$%&195./4$C5,7*$?&+153$G+'1$H+.1.'5$10$9,22*+9.&7D< These consumer benefit platforms will focus on several core categories. This brand-platform-category map will be leading in executing our strategy towards suppliers, customers and consumers. Strategic objectives The combination of a focused roadmap, our building blocks and the strategic choices means that we now have a set of initiatives that we need to execute to put our plans into action.

13 11 Four European Consumer Platforms Consumer Platforms Point of differentiation Consumer motives Consumption moments Introduction Organic Nutrition Best nutrition from organic ingredients Daily nutrition Breakfast, lunch, in-between Organic Taste Indulgence Rich and exciting taste from organic ingredients Indulge and reward Breakfast, in-between Organic Taste Cooking Taste closest to fresh prepared organic meals Complete organic cooked meal Lunch/dinner meal occasions Organic Basics A strategic platform to enter the Dutch grocery market Alternative to grocery private label Breakfast, lunch, in-between First, focus will be on top-line growth to realise sales growth and gain market share in our core categories and core brands. We also need to accelerate growth through acquisition of organic brands with strong management in place. Second, we have to improve EBIT margins by increasing gross margins via savings realised through central sourcing and a richer product mix. We will manage non-core brands for cash. We have to increase the capacity utilisation of our own factories in Germany and Italy, and we are to reduce overhead cost. Third, we are to grow our export business in selected countries and we aim to establish our footprint in other European countries. Fourth, we will also improve operational execution, operate an efficient cross-country organisation, and leverage our scale and capabilities. Last, we will raise the overall talent bar and are aiming for initiatives to further increase engagement of our employees. With this strategy we aim to achieve, over the medium term, a return on capital employed in excess of our weighted average cost of capital (presently estimated around 12-13% pre-tax) and hence create economic value. The group will be capatilised according to a target net debt level below 2.5 EBITDA excluding exceptionals. Organic expertise In order to stimulate the exchange of knowledge and experience that is widely available within the Company, the Organic Expertise Centre (OEC) was established in Specialists will join forces and will work on pan-european issues, such as the sourcing of sustainable palm oil. Organisation Wessanen has four segments. All operating companies have a profit & loss account responsibility and they are the basic building blocks for the organisation. For Wessanen Europe, there is a strategic coordinator for both the Grocery and HFS channel. Their role is to oversee the strategic direction and development of Wessanen Europe s Grocery and HFS channel businesses in the various countries, to champion the portfolio development and to coordinate and supervise all channel activities. By doing so, we are to create synergies and to streamline the cooperation between the countries for each channel. In addition, Wessanen Europe Grocery and Wessanen Europe HFS have an Executive Management Group (EMG) consisting of the strategic coordinators, country managing directors, senior corporate staff and the Executive Board, chaired by the CEO. The EMG is a platform for discussing actions and initiatives, taking cross-country decisions and deploying resources. The aim is to coordinate and direct the implementation of the strategy. It means a greater operational involvement for the Executive Board, and a greater degree of involvement and responsibility for the individual country managers. To exploit Wessanen Europe s potential, we need to strengthen our central steering capability and adapt our organisational and governance models. We therefore intend to transition our corporate headquarters role from that of a strategic architect to a strategic orchestrator. The nature of corporate guidance will therefore shift from strategic guidelines to strategic development and the degree of business integration will be moving from stand-alone businesses to shared business systems. We will set tailored operational targets for each operating unit, using a dedicated framework and proactive intervention. We will also establish focused lead or coordination roles in functions that have a genuine European scale such as sourcing, innovation, brand alignment, supply chain, operations, IT, organic expertise and export. I,+@,+&1*$ 5*&6J8&+1*+'$ 1+&/'.1.,/./4$ -+,2$&$ '1+&1*4.9$ &+95.1*91$1,$ &$'1+&1*4.9$,+95*'1+&1,+;<

14 12 Market review The world around us '())$*(*&0)&"*(&";&67(&%($10*2&5%$#(:)&0*&67(&89:"5($*& ":2$*03&;""1&4$:<(6=&P70)&4$:<(6&0)&$66:$360+(&$*1& 2:"G0*2&$*1&06)&2:"G67&5"6(*60$%&0)&)02*0V3$*6=& ";&":2$*03&$*1&06)&)9)6$0*$H%(&5:"19360"*&4(67"1)=& P7(#&$55:(30$6(&67(&7($%67&H(*(V6)&$*1&:037&6$)6(= of consumers. In recent years organic food has become a common feature in grocery stores and supermarkets. The continuously increasing engagement of mainstream consumers, allied to grocery retailers tactics of enhancing margins via private label products has broadened the assortment of organic food on display at grocery chains. We expect most of the future market growth to emerge from the mainstream grocery channel, although specialist health food stores will remain an important channel for many consumers. A)$2,2*/1$B$95,,'./4$,+4&/.9$ -,,6$.'$&$7.-*'1)7*$95,.9*D< The organic market is attractive and has significant potential. In 2010, the European market grew an estimated 3% to EUR 19 billion. This growth was in line with 2009 (3.7% growth) with both years clearly impacted by the economic recession. The countries we are active in grew an estimated 2% to EUR 14 billion. Over the past decade up to 2008, consumer demand for organic food has been rising consistently with historical growth in Europe in that period running around 10% per year. Per capita consumption is still low although on the rise. This rise is supported by organic food also engaging mainstream consumers nowadays. Organic makes up 2.6% of the total spending on food and beverages in the countries we are active in, representing only a small, but growing fraction of the total market. This percentage varies between 1.7% for the UK and 3.3% for Germany and Italy. Historically, organic food was a niche market, largely confined to specialist health food stores. Volumes were low, attracting a relatively small but fiercely loyal group When is organic organic? To be allowed to be called organic, products have to meet strict criteria. For example, they must be demonstrably free from GMO content (genetically modified organism), antibiotics and growth hormones. Production methods also have to be sustainable and the products must not contain food additives. A European logo and national logos safeguard the uniqueness of organic. The predicate organic therefore does not specifically relate to one or more categories of products, but it applies to all food and beverages, if produced and processed in line with these principles. Organic market size in 2010 (in EUR billions)! 2008! 2009! 2010 estimate 3.0 0% 3.0 France % 5.8 Germany % 2.4 Italy % 0.6 Netherlands % 0.3 Belgium % 2.0 UK Source: Organic Monitor; Wessanen growth %

15 13 Breakdown by channel (2009)! Grocery chains 57%!" Health Food Stores 26%!" Catering and Food Services 5%!" Other 12% Breakdown by category (2009)! Fruit/vegetables 28%!" Meat products 13%!" Dairy products 13%!" Beverages 9%!" Other 37% Introduction EUR 19 billion EUR 19 billion Source: Organic Monitor Source: Organic Monitor Per capita consumption of organic food (in EUR per year) France 48 Belgium 34 Germany 70 Italy 41 The Netherlands 40 UK 33 Ambient organic food At Wessanen, our main focus is on ambient food, meaning it has been processed to be stored safely at room temperature for a usefully long shelf life. We are also active in the distribution of vegetables, cheese and fresh fruit in the Netherlands (via Kroon) and in France (via Biodistrifrais). In general, we prefer to brand our products to differentiate ourselves from competition, which is more difficult for fresh produce. Much of the growth in the organic market in recent years has been attributable to non-ambient produce. Emotionally, consumers place ambient lower in the hierarchy than fresh produce. HFS Organic products reach the market through two primary channels: dedicated health food stores and retail grocery stores. To a greater or lesser degree, owners of dedicated health food stores pursue an ideological agenda: they want to sell and promote organic food giving consumers a clear, healthy and tasty alternative. Many of these stores are small or medium-sized, but generally offer a full range of ambient products as well as vegetables and fruits. Many health food stores retain their independence, while an increasing part belongs to a chain, such as Alnatura or Dennree in Germany, Biocoop in France or Natuurwinkel or GooodyFooods in the Netherlands. Those stores belonging to a chain are either company-owned or part of a franchise chain like we operate with both Natuurwinkel and GooodyFooods. In Europe, there are about 5,000 stores in total. Independent health food stores have sourced their products from wholesalers on a store-by-store basis. HFS chains, which are on the rise, tend to go more often to suppliers directly. Grocery retail chains For mainstream grocery retailers, organic has become a small but important segment that functions as an image and margin builder. It enables them to promote their image as a company that cares about the environment and about the ethical and social sensitivities of its consumers. Market growth has been stimulated by broadening the range of organic products, adding new categories and by dedicating more shelf space to the organic proposition. Organic food products are sold either on the mainstream or dedicated shelves. The mainstream option displays the offerings per category, such as tea or cooking aids, bearing the risk that organic is insufficiently visible due to its still small scale. Various surveys and research conducted show that while a consumer expects to find organic at the mainstream shelf, in reality that same consumer finds it hard to locate the organic products in-store. The dedicated shelf has the strong benefit that it jointly groups all organic ambient products offering a one-stop shopping. To the consumer it offers a clear, grouped offering. The grocery chain benefits from directing consumer traffic towards these dedicated shelves enabling them to benefit and fuel growth of organic. Consumer perceptions Today, most consumers are aware of the relevance of organic and its sustainable production methods. They also perceive organic food as an attractive proposition that offers health benefits, rich taste and good product quality. But in many cases consumers do not act on that perception. There is a significant gap between what consumers say and what they actually do. The single largest barrier is awareness, as many consumers do not understand the organic proposition and are confused by the terminology. For example, they find it difficult to differentiate between concepts such as natural, Fair Trade, sustainable, local and organic. Other barriers include lack of choice, low availability and high prices relative to non-green options. An important task for Wessanen in the years to come is to convince consumers of the attractiveness and uniqueness of organic food and to help them translate this positive perception into more frequent buying of organic food. The remedy to all these barriers lies in demonstrating that organic has clear benefits for consumers. Single European organic logo A single European certification system for organic products was introduced in July 2010, including the obligation to use the EU logo on all pre-packaged organic products that have been produced in any of the EU member states. This is in addition to the various national logos which are all governed by strict certification systems as well.

16 14 Business review '())$*(*&89:"5(&F:"3(:#&$*1&'())$*(*&89:"5(&X?K '(&;"39)&"*&":2$*03&;""1&H(0*2&)"%1&+0$&6G"&37$**(%)Y& F:"3(:#&$*1&X($%67&?""1&K6":()&,X?K/=&'(&$:(&$360+(& +0$&"G*&"5(:$60"*)&$*1&0*&*94(:"9)&"67(:&3"9*6:0()& +0$&(B5":6= Key objectives 2010 Achieve revenue growth Create solid platforms across countries Invest in/harmonise brands Reorganise/centralise supply chain Establish Organic Expertise Centre Key achievements 2010 Four consumer benefit platforms developed to guide strategy towards suppliers, customers and consumers Spending on advertising and promotion increased Start of centralised sourcing Establishment of Organic Expertise Centre progressing, to be fully operational in 2011 Key objectives 2011 Achieve revenue growth and gain market share Improve operating margins through focus on core brands and strengthening of brand equity Improve operational excellence We conduct three business models: brands in Wessanen Europe Grocery and brands as well as wholesale organised in Wessanen Europe HFS. These are managed by a matrix structure. Both segments have a strategic coordinator in place who is responsible for ensuring cross-border exchanges of best practice, aligning innovations and deploying strategies and tactics. Each of our country operations is responsible for its profit and loss account and we consolidate these in our management reports along the two business segments. Cross-border functions, such as sourcing, supply chain, innovation, marketing and ICT are increasingly coordinated centrally and include strategic planning and shared business systems. Execution continues to occur at local management level. The playing field is determined by four European consumer benefit platforms, which focus on core categories, representing three-quarters of our brands. This European map describes the relation between platforms, categories and brands. It will be leading in executing our strategy towards suppliers, customers and consumers. Market developments at Wessanen Europe Grocery In 2010, most of our markets were impacted by low consumer confidence, particularly in HFS, while grocery markets fared better. Grocery markets in general are characterised by retailers increased interest in organic food, additional shelf space and retailers expanding their private label offering. Many of those retailers are also searching for the best way to deal with the organic shelf. Examples of initiatives on our side are category management and the development of a one-stop shopping organic shelf in the Netherlands. A)$2,2*/1$B$%+.1./4$ 15*$K//8&7$L*@,+1$ %5.7*$*/E,)./4$1*&$$ %.15$9,,>.*';< Cross-border category management Our chocolate cookies from Bjorg are a big hit in France. This success inspired us to introduce the product across Europe. Today, consumers in the Netherlands and in Germany are able to enjoy the fourré choc as well. A great example of getting the best to the rest!

17 15 In France, growth of the organic grocery market decelerated during the year as a result of ongoing private label competition among the major retailers. Sales of our brands via the grocery channel showed a modest increase, with our key brand Bjorg showing continued growth and market share gains. Innovations such as meals and chilled also contributed to growth. During the year we gradually started to reap the benefits of our extended sales force, resulting in increased distribution volumes. Key figures Wessanen Europe Grocery In EUR millions, unless stated otherwise Revenue Autonomous revenue growth 1 3.4% EBITDA Operating result (EBIT) 7.0 (7.2) EBIT margin (as a % of revenue) 3.0% (3.2)% Cash flow from operating activities ROCE 10.6% (8.7)% The dietetic market stabilised in the first half of the year and showed some growth in the second half. Revenues from the dietetic brand Gayelord Hauser were below last year. Ethnic products performed well. The UK market remained broadly stable. Grocery captured some growth at the expense of smaller stores while grocery remains a highly competitive market. After nearly a decade of strong growth for organic produce, for the last few years consumers in the UK have become confused about the benefits of organic and its relation towards fair trade and local sourcing. This resulted in depressed growth numbers in the UK organic market. The Benelux grocery market showed double-digit growth, driven by increased interest at several retail chains, a growing private label assortment and A-brands introducing organic line extensions. Dairy, coffee and tea, meat and dry grocery have been growing fastest. Zonnatura volume was stable due to increased distribution at several retailers, offset by the effects of a large grocery chain which adjusted its speciality food shelf concept, resulting in some Zonnatura products those without functional claims being relocated to the mainstream shelf. Biorganic was up and we introduced the Schär range of gluten-free products. The grocery market in Germany was up, while our revenue showed strong growth, due to the success of Whole Earth. Increased distribution and higher volumes, on the back of three successful City campaigns, were the main drivers for this success. Our private label sales declined due to weak sales at discounters, and our de-emphasising. In Italy, we have started to build the presence of our Bjorg and Efficance brands in the grocery channel following in-sourcing in Spring 2010 of distribution previously handled by a third party. We will continue to invest in weighted distribution and brand support. For 2011, the expectations are mixed, but overall we expect market growth in this segment. For France, we expect the market to be flat, for the UK, Germany and Italy low to mid single-digit growth, while the Benelux is expected to enjoy double-digit growth. Market developments at Wessanen Europe HFS In 2010, most of our markets were impacted by low consumer confidence, particularly in HFS. Key figures Wessanen Europe HFS In EUR millions, unless stated otherwise Revenue Autonomous revenue growth 1 (3.5)% EBITDA Operating result (EBIT) EBIT margin (as a % of revenue) 1.5% 1.6% Cash flow from operating activities ROCE 4.6% 4.4% 1 Third party revenue In France, the HFS market was weak in 2010, which was in contrast to the growth seen in This weakness manifested itself particularly in the chilled sector. However, we were able to gain some market share with especially Bonneterre showing gains. The HFS market in the UK remained weak with smaller independent traders particularly affected. Consumer confidence remains low. Our volumes declined, although at a slower pace than the HFS market in general. Our UK HFS business, Tree of Life UK, is reported as held for sale. We are reviewing strategic options for the business in light of an increasing focus on brands and high valueadded activities. The Dutch HFS grew modestly, showing a mixed underlying performance. As a general trend also evidenced in the grocery channel smaller shops are struggling while larger, more innovative stores achieve higher sales. Natudis is well-positioned to benefit from this trend. Our Benelux sales were up as a result of the acquisition of Kroon, the No 2 perishables supplier in the HFS channel. This strengthened our position, allowing us to distribute a wider product range to our customers. Natuurwinkels continued to perform well. A second GooodyFooods store has been opened with new ones planned for The German HFS market grew low to mid single digit. Several of the larger HFS chains continue to perform well, whereas reform-houses saw lower volumes. Our revenue was slightly lower with sales to health food stores growing, while export was lower. Production at our Allos and Tartex plants was stable. For 2011, the expectations are mixed for market growth in the various HFS markets across Europe. Market growth is expected to be flat in general, with the UK and France expected to be negative and the Benelux and Germany to be up. Rice crackers with guts Kallo extended its rice crackers assortment with delicious new flavours, such as mature cheese & chives. Packed in sensational black bags, even men can t resist our rice crackers nowadays! Rice crackers are ideal for lunch or as guilt-free snack, are full of fibres and made from wholegrain brown rice. Business review

18 16 Business review '())$*(*&89:"5(& F:"3(:#&$*1&'())$*(*& 89:"5(&X?K Natuurwinkel and GooodyFooods are Dutch franchise chains operated by Wessanen. Natuurwinkel offers a wide assortment with honest and organic products in a modern and inspiring store environment, while GooodyFooods stands for organic, tasty, good and fresh. This retail concept is built around the idea that feeling good is closely connected to enjoying good food. Taste, sustainability and wellness are at the core of this brand new store concept. Operational developments: Grocery and HFS In 2010, a large proportion of our management focus was applied to centralising our sourcing functions, harmonising and supporting our brands and investing in ICT and process improvements. We continue our investments in enhancing capabilities (e.g. market research, innovations and category management) and improving the overall quality of the organisation. Last year, we successfully introduced SAP ERP systems in the grocery part of our French business, in our Dutch HFS business and in part of our French HFS business. For 2011, we plan to introduce these systems in the grocery part of our UK business, and to prepare the roll-out to the remainder of the French HFS business and in Germany. Towards the end of the year, both the French and Dutch HFS businesses have been restructured to adapt the organisation and reduce overhead costs. In the Netherlands and the UK we also made changes in the management team. We centralised and professionalised sourcing. We created a single way of working, increased the expertise in raw materials, bundled volumes and reduced complexity. The aim is to lower the cost of goods sold, while creating strategic partnerships with suppliers. We fine-tuned the four European consumer benefit platforms, focusing on core categories. This European brand-platform-category map will guide the execution of our strategy in relation to suppliers, customers and consumers. Despite the introduction of ample new products, further improvement is required in the innovation process. Currently, there are too many me too introductions. Another area of improvement is to learn from successful products in other countries. Therefore, the top 100 list of bestsellers has been reviewed and we are looking at the feasibility of introducing a number of these products in other countries under local brand names. Advertising and promotional spending was up last year to support and build our brands. The four consumer benefit platforms and chosen core categories are instrumental in deciding on the efforts to be put behind any brand. We also continue to focus on trade discounts, ensuring that in return for that spending our brands receive additional support. A)$2,2*/1$B$&$6.//*+$-877)$ :&'*6$,/$,+4&/.9$./4+*6.*/1'D< Some of the marketing highlights include a range of Bjorg advertisements in French newspaper Le Monde highlighting the health effects of organic, the Whole Earth City campaigns in Germany and the first ever TV commercial for Whole Earth in the UK. The German Whole Earth additional City campaigns took the brand to Hamburg, Munich, Cologne and Berlin. In a set period, a mix of promotional activities like local media and outdoor advertising, product sampling and raffles were used to support the roll-out.

19 17 Financial performance at Wessanen Europe Grocery Revenue amounted to EUR million. Autonomous third party revenue growth equalled 3.4%. Growth was recorded in Germany as a result of the successful further roll-out of Whole Earth, in France due to increased volumes and market share gain at Bjorg and in the UK due to innovations, such as Kallo rice cakes and Whole Earth peanut butter. EBITDA was stable at EUR 12.4 million, while operating profit strongly improved to EUR 7.0 million, representing an operating margin of 3.0%. Last year s operating profit was impacted more heavily by impairment of intangible assets, while in 2010 we recorded increased costs for advertising and promotion, SAP roll-out in several operating companies and an enlarged French sales force. Non-recurring costs mainly include the impairment of a brand of EUR 4.5 million and severance costs of EUR 1.5 million. Business review Operating cash flow was EUR 18.8 million (2009: EUR 7.9 million), driven by improved working capital as a result of lower inventories and trade receivables. Capital expenditure amounted to EUR 2.3 million versus EUR 1.1 million in Financial performance at Wessanen Europe HFS Revenue increased to EUR million, supported by the inclusion of Kroon since April. Autonomous third party revenue growth was (3.5)% driven by sales declines in the UK and to a lesser extent the Benelux and France. German sales were modestly up. EBITDA was lower at EUR 10.7 million. Operating profit was EUR 4.4 million, in line with 2009, despite a poorer margin mix, increased ICT costs in relation to SAP implementations and higher administrative expenses. Non-recurring costs mainly include severance costs of EUR 1.1 million and a goodwill impairment of EUR 4.2 million in relation to the classification as held for sale of Tree of Life UK. Operating cash flow was EUR 3.5 million (2009: EUR 12.9 million). Working capital increased mainly as a result of higher accounts receivables and lower accounts payables, partly offset by lower inventories. Capital expenditure amounted to EUR 1.7 million (2009: EUR 2.7 million). Sustainability Organic food is all about pure ingredients which have been farmed and processed in a sustainable and environmentally friendly way. To safeguard the quality and organic nature of our ingredients and products, we put much emphasis on the quality and transparency of our supply chain. In addition, we continue to implement sustainability more and more in our daily operations. Our Organic Expertise Centre, which was founded in 2010, bundles the expertise of our own people to inform, train and activate our employees and external stakeholders about organic. A)$2,2*/1$B$6+./>./4$&77$$,-$2)$-&0,8+.1*$-+8.1$@,895D< Children love it! Young parents are very much aware of the well-being of their children. Nothing is more important than happy and healthy kids. Bjorg, Zonnatura and Ekoland market kids food solutions that are fun, tasteful and are irresistibly yummy. All of these products are based on well-balanced recipes; we looked at the amount of fibre, salt and sugar and the size of the portion. Ideal for parents who want to treat their loved ones in a nutritious and nice way. Wessanen s children s assortment contains fruit pouches, cookies, cereals, juices and fruit gums, although this may vary per brand.

20 18 Business review?:"j(*&?""1)?:"j(*&?""1)&5:"193()&$*1&4$:<(6)&;:"j(*&)*$3<& 37$**(%)&0*&67(&A(*(%9B&$*1&+0$&(B5":6&6"&"67(:& 89:"5($*&3"9*6:0()= Key objectives 2010 Revitalise the Beckers brand Continued focus on production costs Key achievements 2010 Beckers brand awareness increased; new innovations like Mammoet and Party mixes Bicky brand awareness and customer penetration increased Key objectives 2011 Increase relevance of Beckers and Bicky brands for our customers and consumers Improve operational efficiency by continuously improving quality of processes, systems and production We continue to work to improve sales growth and realise higher operating margins over the medium term. At some point in time, we expect Frozen Foods to be divested. Frozen Foods has strong market positions in the Benelux and its markets are relatively resilient in an economic recession. It comprises Beckers Benelux and Favory Convenience Food Group. Beckers Benelux has its offices in Breda (NL) and production locations in Katwijk (NL) (spring rolls) and Deurne (NL) (bread snacks). It focuses on the production and sales of strong brands like Beckers and Bicky in the out-of-home, grocery and foodservice channels in the Benelux. Favory, in which Wessanen has a majority stake of 64.1%, has its offices in Deurne and production facilities in Bocholt (B) (meat snacks) and Deurne (meat and breadcrumb snacks). It produces the basic snack assortment for Beckers and it produces for and sells private label products to major retailers and out-of-home wholesalers. In 2010, the strategic emphasis at Beckers was to revitalise the existing brands after discontinuing some 25 products at the end of The brand awareness of Beckers increased as a result of advertising and promotional spending will be a year of innovations. These are expected to add considerable value given that the current offering is not extensive. It is not about the number of introductions, but each innovation should strengthen the existing product range. A)$2,2*/1$B$2*$ &/6$2)$:,)-+.*/6$ 2&>./4$6.//*+;< At home In Katwijk (NL), we produce 700,000 spring rolls daily in a fully automated process, while retaining the element of craftsmanship. The product range includes different flavours such as meat, fish and vegetable and different cooking methods such as microwaving and deep-frying - and you can enjoy these as an appetizer or as a meal.

21 19 Market developments Lower consumer demand affected both private label and branded sales. In the Benelux, grocery markets were stable, while out-of-home declined. Competition was fierce in the out-of-home channel partly due to the competition of private label. The frequency of visits to cafeteria was stable. In the out-of-home channel Beckers gained market share in Belgium due to partnerships with clients, emphasis on successful Beckers brand products and the introduction of the Bicky Royal. In the Netherlands, Beckers is countering private label by innovations and category management. In Dutch grocery, we gained market share due to increased distribution at several retailers. Increased brand awareness of Beckers has also been instrumental. In previous years, less focus and limited innovations resulted in the loss of market share. We renewed our focus since 2009 and combined this with a solid basic assortment, clear concepts and more innovations. This helped us regaining market share in The market growth for private label levelled off during the year, with the market even down in the fourth quarter. Heavy promotional activities during the World Cup football by well-known brands temporarily depressed sales at grocery. In general, consumers in grocery spend little time at the frozen products shelf, preferring to give it just a cursory glance. Beckers therefore strongly focuses on design and packaging as well as in-store product demonstrations and advertising. Operational developments The continued optimisation of our supply chain and production processes materialised in different areas, like lowering the all-in plant costs, the increased operational and financial forecast reliability and lower transport costs. Capital expenditure projects included the renewal of a freezer, rearranging the warehouse and the construction of additional storage capacity at Favory. Strong focus was also on the revitalisation of the Beckers brand to increase awareness. Several commercials with the two Beckers brothers were aired and promotions Key figures In EUR millions, unless stated otherwise Revenue Autonomous revenue growth (3.3)% EBITDA Operating result (EBIT) EBIT margin (as a % of revenue) 3.8% 2.3% Cash flow from operating activities ROCE 7.8% 3.8% coincided with the World Cup football. Also the partnership with Dutch Shell fuel stations regarding the Beckers snack wall was extended. Financial developments Revenue amounted to EUR million, a 3.3% autonomous decrease due to lower volumes and a poorer sales mix. EBITDA increased 5.8% to EUR 9.4 million, while operating profit strongly increased to EUR 4.3 million, representing an operating margin of 3.8%. This was due to a strong cost focus and somewhat lower raw material prices. Operating cash flow was EUR 10.4 million (2009: EUR 9.8 million). Working capital improved as a result of lower inventories and trade receivables, partly offset by lower accounts payable. Capital expenditure was EUR 2.7 million versus EUR 2.3 million in Sustainability All production sites meet the most stringent hygiene standards in Europe, like IFS, BRC and HACCP as well as safety and environmental standards (ISO 9001 and 14001). We use an extensive tracking-and-tracing system to be able to control our supply chain. At Beckers, we also try to make our products as sustainable as possible, which is why we use, for example, FSC cardboard and sustainable vegetable oil. We have a well-defined nutritional profile for all our products and we apply internal guidelines for the maximum amount of fat, salt, saturated acids, trans fatty acids and calorific value in our products. Our philosophy at Beckers and Favory is: eating snacks is enjoyable as long as you do so in moderation and take sufficient exercise. Bicky Royal In autumn, the Bicky Royal was launched in the Belgian out-of-home channel. It is a king-size version of the well-known Bicky Burger with newly designed packaging. The introduction was accompanied by a campaign on several Belgian television stations and a renewed website including a Bicky maps locator. Business review Mammoet In spring 2010, we launched the Mammoet (Mammoth) in the Netherlands, an extra large 25 centimetre frikandel with a unique box and sauce. The introduction in the out-of-home channel was very successful with over 2,000 points-of-sale realised in a short period of time. Today, we continue to see many people enjoying a Mammoet on a regular basis.

22 20 Business review S4(:03$*&A(+(:$2(&[":5":$60"* 0)&"*(&";&67(&%($10*2&5:"193(:)&";&*"*Z3$:H"*$6(1&& +$%9(Z5:03(1&;:906&1:0*<)&$*1&5:(4094&3"3<6$0%&40B(:)&& G067&\066%(&X92&$*1&]$0%#.)&H(0*2&67(&%$:2()6&H:$*1)= Key objectives 2010 Redesign business processes Reduce operational costs Focus on profitable customer base for two key brands: Little Hug and Daily s Key achievements 2010 Completed business processes redesign Efficiency of operations significantly increased Key objectives 2011 Build equity of core brands by further optimising marketing and sales Expand distribution across customers, channels and regions Grow sales and improve operating result and margin Key figures In EUR millions, unless stated otherwise Revenue Autonomous revenue growth (3.0)% EBITDA 6.6 (9.7) Operating result (EBIT) 1.9 (30.4) EBIT margin (as a % of revenue) 2.0% (33.9)% Cash flow from operating activities ROCE 4.1% (49.7)% ABC offers a variety of products from kids drinks to cocktail mixers. It is based in Verona (PA), where it also has a large production plant. ABC operates within both the grocery and out-of-home channels using an extensive network of brokers and distributors to market and sell its products throughout the United States was a difficult year for ABC, due to the discovery of accounting irregularities, the corrective actions taken and the arrival of new management. All focus in 2010 was on completing the redesign of business processes, reducing operational costs and strengthening our Little Hug and Daily s brands. We succeeded in all three objectives, although we still have some way to go. In 2011, focus will remain on a further reduction of operational costs, next to growing sales. In line with the strategic choices made in 2009 to focus on organic food in Europe, we intend to divest ABC, in principle in Market developments In 2010, our markets were impacted by lower consumer confidence resulting from the weakness of the US economy. The market for fruit drinks witnessed intense competitive activity. It was also impacted by lower merchandising efforts at a large retailer for value brands. Despite the out-of-home channel being affected by low consumer confidence, the market for cocktail mixers developed favourably. Operational developments The step-by-step implementation of operational developments is showing results: efficiency advanced on all production lines. During the year, we have also put a great deal of effort into enhancing the administrative, financial and IT processes. We also increased the investments into consumer research and work continues on the introduction of flavour extensions and new concepts. A)$2,2*/1$B$5&0./4$&$-+8.1$ 6+./>$./$15*$@7&)4+,8/6;< Low in sugar level Little Hug contains just two grams of sugar. Kids love the taste while parents can buy these without hesitation.

23 21 Daily s continues to do well. Especially the ready-to-drink cocktails showed strong growth driven by the ongoing success of frozen pouches. During 2010 we invested in marketing and advertising to strengthen the Daily s brand. Consumer print advertisements, promotions, Facebook advertising and the launch of a summer promotion micro site Summerology Daily s are several of the initiatives undertaken. Sales of fruit drinks were lower, partly as a result of de-emphasising our focus on private label and partly as a result of lower merchandising at a large customer. We increased the marketing and advertising spending to revitalise Little Hug by raising consumer awareness. We introduced new products like bonus packs and conducted on-line advertising, consumer prints ads and promotions. Financial developments Revenue increased 3.4% to EUR 92.8 million, while autonomous growth was (3.0)%. Daily s gained distribution in ready-to-drink pouches, while Little Hug was impacted by lower merchandising at a large customer and intense competitive activity. Business review EBITDA amounted to EUR 6.6 million and operating profit was EUR 1.9 million, showing a strong improvement from the loss occurred in While 2009 was impacted by large incidentals, the operating profit in 2010 clearly benefitted from operational efficiencies and was higher despite increased marketing spending. Operating cash flow was EUR 5.4 million (2009: EUR 3.5 million). Working capital increased mainly as a result of higher inventories, partly offset by improved accounts receivables. Capital expenditure amounted to EUR 3.1 million (2009: EUR 3.8 million), primarily for the expansion of our pouches capacity. Sustainability In 2010, ABC participated in a programme with EnerNOC, an industry energy efficiency expert, to monitor and reduce electricity consumption at times of peak demand. By participating, ABC will help to protect its community from blackouts, keep electricity rates stable, and help the environment. We continue to strive for environmental improvements by recycling our plastic bottles, corrugate scrap, and foil lids within the factory. We have many processes and equipment in place to separate recyclable material from residual waste. ABC also participates in the plastic redemption programme with the states of Maine and California. Daily s ready-to-drink pouches In autumn, we expanded our pouches capacity to fulfil all demand, which has been strongly growing in 2010, with the business more than doubling in size versus Launched in 2006 and now with a total of seven flavours including Margarita, Pina Colada and Lemonade, we continue to expand distribution. Production efficiency Production efficiencies have improved 24% in 2010 as compared to This was mainly driven by better machine maintenance as well as improved manufacturing processes and procedures. As an internal efficiency measure we use the overall equipment effectiveness (OEE) which was 63% for This exceeded the target of 60% and was far better than the 2009 mark of 51%.

24 22 Business review ]0)3"*60*9(1&"5(:$60"*) ]0)3"*60*9(1&"5(:$60"*)&0*3%91(1&67(&I":67&S4(:03$*& S4(:03$*&H:$*1(1&H9)0*())&^SI>K&A:$*1)=& A"67&7$+(&H((*&10+()6(1&0*&LMNM= In 2010, discontinued operations included two North American businesses, being Tree of Life, Inc. and PANOS Brands. Both have been classified as discontinued operations since the third quarter of This was in line with Wessanen s strategic transition to a group focused on the European Organic food market and, consequently, all North American businesses were to be exited in due course. Tree of Life, Inc. Tree of Life, Inc. is a leading distributor of natural, organic and specialty food products to supermarket chains, independent grocers, natural and health food stores, and specialty stores throughout the USA and Canada. PANOS Brands In December 2010, PANOS Brands was sold to private equity company High Road Capital Partners Fund I, L.P. The transaction price amounted to USD 22 million. PANOS Brands manages a unique and defined portfolio of natural and specialty food brands like KA-ME, Sesmark, Soy Kaas and Amore in the USA and Canada. In 2010, PANOS Brands was reported as Discontinued operations and was deconsolidated per 17 December PANOS Brands realised revenue of USD 31 million in 2010 and generated an operating result of USD 2.7 million. In December 2009, the sale of Tree of Life, Inc. to Kehe Food Distributors was announced. After obtaining approval during an Extraordinary Shareholders Meeting on 13 January 2010, the sale was completed at the end of that month. The transaction price amounted to USD 190 million on a cash and debt free basis. An additional USD 12 million was received in January 2010 for working capital and cash adjustments. On 1 December 2010, a binding ruling was issued by an arbitrator regarding the post-closing adjustments to the purchase price. This resulted in a cash payment to Kehe of USD 8 million in the fourth quarter. Therefore, the net proceeds for the divestment of Tree of Life, Inc. amounted to USD 194 million, excluding expenses.

25 Report of the Executive Board 23 LMNM&G$)&$&#($:&";&0*+()64(*6)&6"&)6:(*267(*&$*1& :(+06$%0)(&"9:&3":(&H9)0*())=&?9%%#&0*&%0*(&G067& '())$*(*.)&)6:$6(2#&6"&;"39)&"*&":2$*03&;""1&0*& was characterised by subdued economic growth in all countries in which we operate. Low consumer confidence in general affected the organic food markets, particularly in the health food channel. Grocery markets fared better. ABC showed steady progress during the year and became profitable again. Frozen Foods continued to focus on efficiency improvements and brand awareness. Our 2010 financial performance a net loss to shareholders must be qualified as unsatisfactory. However, we note that revenue increased to EUR 712 million, growing by 1.4%. The Group s normalised operating result showed a clear improvement over 2009 thanks to improved gross margins and despite increased ICT, marketing and sales spending. Reported 2010 earnings were impacted by incidental charges, in particular impairments of intangible assets. Organisational developments In 2010 we concentrated on strengthening and consolidating our core business, after making the strategic choice in 2009 to focus on organic food in Europe. Organic food is a growth market in Europe. It is a market which is increasingly appealing to the mainstream consumer, in addition to a loyal group of long-time consumers. The refinement of the strategy in the course of last year resulted in a focused roadmap for the years to come. We will concentrate on realising sales growth and gaining market share in our core categories and brands. We intend to improve operating margins through savings from sourcing, increased utilisation of our plants and reduced overhead cost. We also need to improve operational performance by deploying an efficient cross-country organisation and by leveraging our scale and capabilities. To capture more of the potential at Wessanen Europe, stronger central steering, a different organisation and governance model are being implemented. The corporate headquarters therefore is transitioning from a strategic architect to a strategic orchestrator. The nature of corporate involvement will shift to strategic development by closer operational monitoring and guidance. The degree of business integration moves towards shared business systems. It means a focused lead or coordination role in key functions such as sourcing, innovation, brand alignment, supply chain, operations, organic expertise and export, including strategic coordinators for our two main channels. Tailored operational targets are set per operating unit, including ABC, Frozen Foods and headquarters. As of 2011, our strategic and financial plans are based largely on the OGSM model (Objectives, Goals, Strategies and Measures). This framework forms the basis for our strategic planning and execution as well as subsequent reviews. It also ensures all activities are aligned with the corporate and financial goals, and that these are cascaded down to divisional or functional goals, and ultimately to the individual ones. In line with the decision taken to exit all of the North American operations, Tree of Life, Inc. and PANOS Brands were divested in The net proceeds for the divestment of Tree of Life, Inc. amounted to USD 194 million and the selling price for PANOS Brands was USD 22 million. At ABC, our present focus continues to be on developing the business, while we intend to divest the company in principle in Our UK HFS business, Tree of Life UK, is reported as held for sale. We are reviewing strategic options for the business in light of an increasing focus on brands and high value-added activities. Operational developments 2010 was labelled as a year of investments in which the core of the business was to be strengthened and revitalised. We continued to focus on advertising and promotion to build and grow our brands. Tangible results include the continued increase in market share of Bjorg in France, successful introductions in the UK, the further roll-out of Whole Earth in Germany and the build-up of distribution in Italy. We worked on brand harmonisation with the playing field determined by our four consumer benefit platforms, focusing on well-defined categories, like dairy alternatives, biscuits, cereals, spreads and meal components. SAP was successfully introduced in our Dutch wholesale business, the French grocery business and in one of the French HFS businesses. We are continuing our investments to enhance capabilities (e.g. market research, innovations and category management) and improve the overall quality of the organisation. Business review

26 24 Report of the Executive Board We centralised our sourcing activities to benefit from increased expertise, bundling volumes and aligning assortments to result in savings. We also increasingly cooperate with strategic suppliers to the mutual benefit of both. Much work has been done in 2010 and much has been accomplished already, such as the brand harmonisation, increased brand awareness and centralised sourcing. Despite these early successes, there is still a great deal of work to be done. For example, we need to increase the success rate of innovations, fine-tune our go-to-market approaches, become more efficient in our back office operations and accelerate sales growth. In addition, we need to standardise our processes and leverage best practices to a greater degree. Employees The year end number of employees was stable at 2,300. During the year, we hired numerous talented people in our various operations to fill vacant positions as well as to strengthen our teams and expand in areas like central sourcing. The management teams in several countries have been strengthened as well by new hirings. In both the Netherlands and France, reorganisations have been executed towards the end of the year to reduce costs and increase efficiency. One of the building blocks of Wessanen is its passionate people. We continue to invest in them. We see it as a priority to further raise the overall talent bar and to increase the engagement of our employees. Financial developments In 2010 revenue of continuing operations amounted to EUR million, 1.4% higher than last year s comparable revenue of EUR million. Excluding positive foreign exchange effects of EUR 8.4 million, or 1.2%, revenue for the year increased by 0.2%. Autonomous growth was (1.3)%, of which 0.3% was attributable to price/mix and (1.6)% to lower volumes. The acquisition effect of acquisitions done in 2010 (Kroon) amounted to EUR 7.6 million, or 1.1 %. Trading days contributed 0.4%. Wessanen Europe Grocery reported revenue of EUR million, an increase of 4.4% with third party revenue growth of 4.6%. Autonomous third party revenue growth was 3.4%, of which 1.3% was attributable to price/mix and 2.1% to volume growth, mainly realised in Germany, France and the UK. Foreign exchange effects amounted to 0.8% as an effect of the stronger British pound. Trading days contributed 0.4%. Wessanen Europe HFS reported revenue of EUR million, an increase of 1.1% with third party revenue growth of 0.1%. Autonomous third party revenue growth was (3.5)%, of which (0.1)% was attributable to price/mix and (3.4)% to volume, mainly driven by sales declines in the UK and to a lesser extent the Benelux and France. The foreign exchange effect amounted to 0.6% due to a stronger British pound. The effect of the acquisition of Kroon (April 2010) was 2.8%. Trading days contributed 0.2%. M,98'$./$!"#"$$ %&'$,/$'1+*/415*/./4$$ &/6$+*0.1&7.'./4$,8+$$ 9,+*$:8'./*'';< Revenue at Frozen Foods was EUR million, a decline of 3.2%. Autonomous growth was (3.3)%, of which (1.0)% attributable to price/mix and (2.3)% to volume. Declining consumer demand affected both private label and branded retail volumes. Revenue at ABC in euro increased by 3.4% resulting in 2010 revenue of EUR 92.8 million, while in dollar-terms revenue declined. The autonomous decline was 3.0%, with volume contributing (4.0)%, partly compensated by a positive price/mix effect of 1.0%. Revenue mainly decreased due to lower revenue from Little Hug, our fruit drink brand, due to lower merchandising at a large customer and competitive pricing. Operating result (EBIT) of continuing operations increased by EUR 49.7 million to EUR 5.3 million (2009: EUR (44.4) million). Excluding non-recurring items, operating result increased by EUR 6.5 million from EUR 13.3 million in 2009 to EUR 19.8 million in Non-recurring costs in 2010 amounted to EUR 14.5 million, mainly including impairment losses (EUR 8.0 million) and severance costs (EUR 4.4 million). Wessanen Europe Grocery reported an operating result of EUR 7.0 million (2009: EUR (7.2) million). Excluding non-recurring costs of EUR 6.4 million (2009: EUR 19.9 million), EBIT amounted to EUR 13.4 million compared to EUR 12.7 million in This year-on-year increase is largely attributable to a higher gross margin mainly due to increased revenue, partly offset by higher spending on marketing, sales force and ICT (SAP roll-out in several operating companies). Non-recurring expenses in 2010 mainly included an impairment loss recognised on a brand (EUR 4.5 million) and severance costs related to restructurings in France and the Benelux (EUR 1.5 million). Wessanen Europe HFS reported an operating result of EUR 4.4 million (2009: EUR 4.5 million). Excluding non-recurring costs of EUR 5.7 million (2009: EUR 11.3 million), EBIT amounted to EUR 10.1 million compared to EUR 15.8 million in This year-on-year decrease is largely attributable to a poorer margin mix and higher selling and general & administrative expenses, including ICT costs (SAP roll-out in France). Non-recurring costs in 2010 mainly include a goodwill impairment loss recognised following classification of our UK HFS business as held for sale as per the end of Q (EUR 4.2 million) and severance costs incurred related to restructurings in the Benelux and Germany (EUR 1.1 million).

27 25 Financial overview per segment Wessanen Europe Grocery Wessanen Europe HFS Frozen Foods Discontinued operations Nonallocated In EUR millions, unless stated otherwise ABC Total 2010 Revenue third parties Inter-segment revenue (12.1) Revenue (12.1) EBITDA (10.9) 30.2 Operating result (EBIT) (12.3) 7.3 EBIT margin (as a % of revenue) 3.0% 1.5% 3.8% 2.0% 2.4% 0.7% Average capital employed ROCE % 4.6% 7.8% 4.1% 2.0% Cash flow from operating activities (21.7) (3.8) Revenue third parties ,585.4 Inter-segment revenue (9.5) Revenue (9.5) 1,585.4 EBITDA (9.7) 8.3 (13.5) 22.5 Operating result (EBIT) (7.2) (30.4) 2.9 (14.0) (41.5) EBIT margin (as a % of revenue) (3.2)% 1.6% 2.3% (33.9)% 0.3% (2.6)% Average capital employed ROCE 1 (8.7)% 4.4% 3.8% (49.7)% (14.3)% Cash flow from operating activities (22.2) Continuing operations only Business review Operating result at Frozen Foods was EUR 4.3 million, an increase of EUR 1.6 million compared to 2009 (2009: EUR 2.7 million). Excluding non-recurring items and despite lower revenue, operating result increased by EUR 0.3 million to EUR 4.6 million (2009: EUR 4.3 million) as a result of restrained operating expenses. ABC reported an operating result of EUR 1.9 million, compared to EUR (30.4) million in Excluding non-recurring costs, EBIT amounted to EUR 1.9 million compared to EUR (10.5) million in The continued implementation of operational efficiencies is paying off, resulting in increased profitability versus last year s underlying result. We saw room to increase advertising and promotional expenses in 2010 compared to 2009, to revitalise the Little Hug brand and to continue building the Daily s brand. Operating result of non-allocated, largely consisting of corporate overhead expenses, was EUR (12.3) million in 2010 versus EUR (14.0) million in Excluding exceptional items (mainly severance costs), non-allocated costs increased from EUR (9.0) million in 2009 to EUR (10.2) million in Net financing costs decreased by EUR 11.6 million to EUR (8.3) million in 2010, mainly as a result of a decrease in interest expenses incurred (EUR 5.2 million) due to lower draw-downs under the Wessanen credit facility following divestment of the discontinued operations. Financing costs related to an Interest Rate Swap, which was terminated early April 2010, decreased by EUR 1.5 million to EUR 3.0 million in The remainder of the decrease is mainly the result of one-off amendment fees incurred in 2009 of EUR 4.3 million in respect of the refinancing of the syndicated credit facility. C*$5&0*$5.+*6$/82*+,8'$ 1&7*/1*6$@*,@7*$1,$'1+*/415*/$,8+$1*&2'$&/6$*N@&/6$./$ &+*&'$7.>*$9*/1+&7$',8+9./4;< Income tax expense of continuing operations decreased to EUR (0.2) million in The effective tax rate of (7.6)% in 2010 was negatively influenced by the non-deductible impairment of goodwill at Wessanen Europe HFS, unrecognised tax carry forward losses in Italy and the United States and impairments of deferred tax assets, partly offset by the recognition of previously unrecognised tax carry-forward losses in Germany following legal restructuring and positive prior year adjustments. The net income from discontinued operations, net of income tax amounted to EUR (1.8) million in 2010 (2009: EUR (88.3) million), including the net after tax loss recognised on the divestment of Tree of Life, Inc. and PANOS Brands of EUR (3.5) million, partly offset by the operating result, net of income tax, of Tree of Life, Inc. and PANOS Brands for the period until disposal of EUR 1.7 million. Included in the after tax loss recognised on divestment are cumulative exchange rate differences transferred from equity of EUR (6.8) million. As a result, net income amounted to EUR (6.1) million in 2010 (2009: EUR (221.6) million). With a 8.3% increase in the average number of outstanding shares (mainly as a result of 6.8 million ordinary shares issued in the first quarter of 2010), earnings per share from continuing operations increased from EUR (1.94) in 2009 to EUR (0.06) in 2010.

28 26 Report of the Executive Board 15*+*$.'$'1.77$&$4+*&1$6*&7$,-$ %,+>$1,$:*$6,/*;< Working capital at the end of the year amounted to EUR 21.5 million, being 3.1% of revenue (2009: EUR 19.4 million, representing 2.5% of revenue). Excluding acquisition (Kroon), divestment (Tree of Life, Inc. and PANOS Brands) and foreign exchange effects, working capital improved by EUR 3.2 million, mainly as a result of a decrease in inventories and trade receivables as a percentage of revenue. Net cash from operating activities of continuing operations increased by EUR 22.4 million to EUR 34.3 million in 2010, from EUR 11.9 million in 2009, mainly as a result of a positive development in operating earnings compared to 2009 (Earnings Before Interest, Taxes, Depreciation, Amortisation and Impairments increased by EUR 14.0 million), and lower income taxes and interest paid (EUR 32.6 million), partly offset by negative working capital developments (EUR (20.8) million). The decrease in income taxes paid mainly stems from income tax refunds received in France and Germany as a result of legal restructurings. The decrease in interest paid is mainly the result of the decrease in average net debt following divestment of discontinued operations. Net debt decreased by EUR million from EUR million at year end 2009 to EUR 28.8 million at year end Net cash generation by continuing operations, after investing activities, increased by EUR 18.5 million to EUR 19.8 million in 2010 as a result of a higher EBITDA and lower income taxes and interest paid, partly offset by a lower positive working capital development. Net cash generation by discontinued operations, after investing activities, increased by EUR 60.8 million to EUR million in 2010, mainly as a result of the net proceeds from divestment of Tree of Life, Inc. and PANOS Brands in In addition, net debt decreased as a result of the net cash inflow from ordinary shares issued of EUR 17.9 million and a net cash inflow from own shares sold of EUR 0.8 million, partly offset by negative currency effects of EUR 9.7 million. The return on average capital employed increased from (14.3)% over 2009 to 2.0% over 2010 (continuing activities only). This increase mainly stems from the increase in operating profit of EUR 49.7 million to EUR 5.3 million in Financing policy In 2010, the net debt of the Company has been reduced drastically as a result of divestments, operating cash flow generated and an equity offering. The aim is to have net debt structurally below 2.5 times EBITDA, allowing for financing flexibility in the case of acquisitions. Considerations in relation to acquisitions are its strategic fit, a sound financial track record and experienced management. These acquisitions have to contribute directly to the earnings per share and have to be value enhancing from the second year onwards, i.c. the return on capital employed has to be above Wessanen s pre-tax weighted average cost of capital. Dividend policy As a policy, Wessanen aims to pay out a dividend of between 35-45% of its net result, excluding major non-recurring effects. No interim dividends will be paid. Dividend proposal A proposal will be submitted to the General Meeting of Shareholders to be held on 19 April 2011 to pay a dividend of EUR 0.05 per share. In line with the dividend policy of the Company, this represents 39% of the consolidated net result excluding major non-recurring effects, divided by the number of shares outstanding at 31 December The dividend will be paid either wholly in cash or in new shares, at the option of the shareholder, and will be charged to the share premium reserve. A)$Q8/&*=*++&$2,2*/1$B$ #""R$-+*'5$9+&/:*++)$E8.9*;< 2011 key objectives and outlook In general, our focus at Wessanen is on profitable revenue growth, both autonomous and for Wessanen Europe also via acquisitions. Wessanen Europe Grocery and Wessanen Europe HFS will focus on realising sales growth and on market share gains

29 27 in core categories and brands. We also need to accelerate growth through acquisitions of organic brands. EBIT margins have to be improved by increasing gross margins via central sourcing savings and a richer product mix. We are to manage non-core brands and non-core categories for cash. In addition, we aim to increase the utilisation capacity of our own plants and to reduce overhead cost. Given that we are exploring strategic options for our UK HFS wholesale business Tree of Life UK Ltd, a reduction of revenue in Wessanen Europe HFS in 2011 cannot be ruled out. We also foresee some reconfigurations of low value-added distribution activities in this segment to take place, possibly leading to limited additional restructuring costs in We are to grow our export business in selected countries and eventually we aim to establish footprints in new European countries. We will also improve operational performance, operate an efficient cross-country organisation, and leverage our scale and capabilities. ABC s objectives are to build equity of core brands and expand distribution across customers, channels and regions. In 2011, ABC will continue to concentrate on growing sales and further optimise its operating cost structure. Compliance statement The members of the Corporate Executive Board as required by section 5:25c, paragraph 2 of the Dutch Act on Financial Supervision confirm that to the best of their knowledge: the 2010 financial statements included in this Annual Report give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; the management report included in this Annual Report gives a true and fair view of the position of the Company and the undertakings included in the consolidation taken as a whole as of 31 December 2010 and of the development and performance of the business for the financial year then ended; and the management report includes a description of the principal risks and uncertainties that the Company faces. Amsterdam, 23 February 2011 Executive Board Piet Hein Merckens, CEO Frans Eelkman Rooda, CFO Business review At Frozen Foods, the aim is to increase brand awareness and operational excellence. We continue to work on delivering autonomous sales growth and, largely through operating leverage, higher operating margins. We believe this segment has potential to improve in these areas. Our financing policy aims to have net debt structurally below 2.5 times EBITDA, allowing for flexibility when attractive acquisitions present themselves. Considerations in relation to acquisitions are building scale and expanding in markets where we presently operate. These have to contribute directly to earnings per share and be value enhancing from the second year onwards. As noted earlier we expect market growth for the Wessanen Europe Grocery segment, with more modest developments in Wessanen Europe HFS. The economic environment and, hence, consumer behaviour remain uncertain. While we are confident that our strategy for growth and margin improvement will bear fruit in the medium-term, it would be premature to provide a specific outlook for 2011.

30 28 Financing '())$*(*.)&V*$*30*2&)6:$6(2#&0)&$04(1&$6&)(39:0*2&& %"*2Z6(:4&V*$*30*2&";&67(&F:"95&0*&":1(:&6"&V*$*3(&& "9:&(B5$*)0"*&0*&67(&89:"5($*&":2$*03&;""1&4$:<(6& 67:"927&$96"*"4"9)&2:"G67&$*1&$3_90)060"*)= policies to ensure fair disclosure and clear, timely and simultaneous provision of information to its shareholders and other stakeholders. In order to meet these objectives, Wessanen maintains an active investor relations programme to engage with shareholders, analysts and other market participants. Wessanen aims to pay a dividend of between 35% and 45% of its net result, excluding major non-recurring effects. Autonomous growth of the business, resulting into proportionate growth of working capital and investments in fixed assets, will in the ordinary course of business be funded from the positive cash flow from operations. Acquisitions can either be funded with equity or debt, depending on the size of the acquisition, the financing capacity Wessanen has within its credit facilities, and its target net debt level. Wessanen s net debt level is targeted to be below 2.5 times consolidated EBITDAE, but actual net debt levels can be temporarily higher or lower depending on acquisitions and divestments, access to capital markets and the timing of cash flows. A)$2,2*/1$B$,+4&/.9$9*+*&7'$ %.15$',)$2.7>;$S822)D< Financing strategy Wessanen s financing strategy is built around the following objectives: ongoing access to debt and equity markets sufficient flexibility to fund add-on acquisitions optimal weighted average cost of capital mitigating financial risks The capital structure of the Company balances these objectives in order to meet the Company s strategic and day-to-day needs. Wessanen has access to equity funding through its listing on the NYSE Euronext (Amsterdam) Stock Exchange. Wessanen has implemented various Equity offering 2010 During the first quarter of 2010, Wessanen launched an equity offering of 6,835,910 newly issued ordinary shares, representing 9.99% of the Company s outstanding share capital. The offer price was EUR Wessanen used the net proceeds of EUR 17.9 million from the offering to strengthen its balance sheet, thereby providing financial flexibility to carry out its strategic plans, including the divestment of PANOS Brands, and operational plans, such as the amount and phasing of advertising and promotional spending during the year. During 2010, net debt decreased by EUR million and was EUR 28.8 million at year end 2010, mainly as a result of the net proceeds from divestment of Tree of Life, Inc. and PANOS Brands and an equity offering during the first quarter of 2010, in addition to net cash generated by our continuing operations. There were no dividend payments in Credit facilities The Group maintains ongoing access to the debt markets through its committed EUR 100 million, multi-currency credit facility (2009: EUR 250 million). At year end 2010, Wessanen had drawn EUR 35 million from this facility (2009: USD 136 million and EUR 110 million respectively).

31 29 Net debt at year end (in EUR million) Leverage ratio (net debt/ebitdae) In July 2009 Wessanen reached agreement with its four syndicate banks on significant amendments to this credit facility. As a result, the first EUR 150 million of proceeds from divestments were applied to a mandatory redemption of facility loans and a reduction of the credit facility. The remaining EUR 100 million of the credit facility is available until the original maturity in February Wessanen aims to renew this facility during Under the amended facility, Wessanen had to ensure that in 2009 total net debt did not exceed 4.0 times consolidated EBITDAE and did not exceed 3.5 times consolidated EBITDAE in the first half of Although Wessanen exceeded this financial covenant at year end 2009, it received a waiver by the syndicate banks and stayed within its financial and other covenants during Since July 2010, total net debt is not allowed to exceed 3.0 times consolidated EBITDAE and the interest margin on the facility is between 150 to 225 basis points over Euribor based on a leverage grid (net debt/ebitdae). The actual interest margin paid over Euribor ranged from 150 to 300 basis points during The Group aims to contain income statement volatility from fluctuating interest rates and, at the same time, minimise its interest expense. This is primarily achieved through borrowing from its credit facilities in various maturities and modifying the interest rate exposure of debt positions through the use of interest rate derivatives. For further information on our financial risks see pages 33 to 34 in the Principal risks and uncertainties section. Liquidity risk management The Group s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its financial obligations when due, without incurring unacceptable losses or risking damage to the Group s reputation. Wessanen manages its liquidity by monitoring and forecasting cash flows of its operating companies, debt servicing requirements, dividends to shareholders, and other obligations. The Group s syndicated credit facility allows to draw in maturities ranging between a month and a year, while its other credit facilities also allow to draw for shorter periods. Business review The facility has various other general and financial covenants in place which are customary for its type, amount and tenor. Wessanen should not declare or pay a dividend exceeding 45% of its net results, excluding major non-recurring items. There are certain restrictions in place in case of acquisitions. The Group has uncommitted credit facilities in excess of EUR 50 million with various banks throughout the Group. At year end 2010, we did not draw from these facilities. In addition, Favory Convenience Food Group has a EUR 5.5 million credit facility, of which EUR 0 million was drawn at year end (2009: 4.4 million). Financial risk management A USD 136 loan drawn under the credit facility at year end 2009 (see Note 22 to the consolidated financial statements) for the financing of the North American businesses, was redeemed with the proceeds from the sale of Tree of Life, Inc. in the first quarter of Since then, Wessanen has no outstanding USD loans. With the sale of Tree of Life, Inc. and PANOS Brands, Wessanen s invested capital in North America has been reduced considerably. Wessanen does not hedge capital invested in and net income from foreign subsidiaries to the Euro.

32 30 Principal risks and uncertainties *"6&$%%&";&G7037&$:(&G0670*&"9:&3"*6:"%=&]"0*2&H9)0*())& Risk Management and Internal Control Framework The Executive Board is responsible for setting risk management policies and strategies. Wessanen s Risk Management and Internal Control Framework is an integral part of our business model and is designed to identify and manage risks as we pursue our overall corporate objectives (see picture below). The company-wide Framework of Internal Control (FIC), together with our Authority Limits, Code of Conduct and policies and procedures are important components of our governance structure. The FIC provides an overview of the control activities applied to the most important process level risks of the main business functions throughout the entire organisation. The purpose of these control activities is to ensure effective and efficient operations, reliable financial reporting and compliance with laws and regulations. Process owners have to assess the effectiveness of controls on an annual basis. The results are communicated to the Executive Board and the Audit Committee of the Supervisory Board. For identified control weaknesses, an action plan is put in place by management. In 2010, we started a project to further strengthen our control over core processes (see next section). Additionally, twice a year management of each operating company submits a Letter of Representation (LoR) to the Executive Board, confirming responsibility for the design and effectiveness of internal controls over the execution of the financial procedures and for identification of financial reporting and operational risks. During Quarterly Business Reviews (QBRs), senior management of operating companies report to the Executive Board on recent risk developments and progress in action plans. Risk Management and Internal Control Framework Supervisory Board Executive Board Vision, Mission Long term strategic objectives Short term operational and financial goals Periodic Financial and Operational Performance Reporting Wessanen s primary processes Suppliers Supporting processes e.g Finance, ICT, HR, Legal Customers Consumers Internal Audit Services

33 31 This process enables the Executive Board to monitor and manage the company s risk profile. Developments in 2010 affecting Wessanen s risk profile In the course of 2010 we undertook the following steps to strengthen Wessanen s risk control environment: Fine-tuning of Wessanen s strategy. For Wessanen, 2010 was a year of investments to strengthen and consolidate the core business. Centralised sourcing, innovation, category management and brand harmonisation in accordance with clearly defined consumer platforms have been other key areas for us. The sale of Tree of Life, Inc., our North American subsidiary (completed January 2010), and PANOS Brands (completed December 2010) is part of our strategy to focus on our European business. After the reporting irregularities discovered at ABC in 2009, management developed and rolled out an extensive control improvement programme at ABC. Our project to gradually implement our new ERP system SAP in Wessanen Europe Grocery and HFS operating companies has required and continues to require significant effort from our (ICT) staff. SAP was implemented successfully in France (Distriborg) and Benelux (Natudis) whereby major steps were taken to increase standardisation and stability in critical supply chain and financial processes. In addition to the control improvement programme at ABC, we started a project to improve our companywide Framework of Internal Control, to be completed in In order to enhance our risk control awareness we have implemented a risk self assessment tool, which focuses on financial reporting risks. This year, we have included our Entity Level Controls in the tool and tested their effectiveness. A large part of 2010 we effectively had no Internal Audit Department due to staff departures, in part linked to the divestment of Tree of Life, Inc. In the second half of the year the department was rebuilt. Internal audit will perform risk based operational audits at both operating company and corporate level. In this new set up, the function helps to ensure that we maintain and improve the integrity and effectiveness of our internal control framework. Following our transformation to a company focusing on the European organic food market, Wessanen is revisiting its business and financial processes and procedures to fit the new organisation. In light of these changes we decided that we would benefit from the fresh perspective on existing internal processes and procedures by a new external audit firm. At the same time we are following a more integrated management approach across the operating companies of Wessanen Europe Grocery and HFS and conducting more detailed financial and operating reviews. Following a more detailed financial review we identified, at the end of 2010, irregularities in invoices of one specific service provider of one of our European operating companies. A high degree of operational integration exists between the service provider s processes and ours. This issue does not have any impact on the reliability of our financial reporting. However, we have immediately started to strengthen controls in the related internal processes. Wessanen s principal risks and mitigation In this section, we set out the risks Wessanen management believes are our principal risks, and are specific to our business. Accordingly, it is not intended to be a comprehensive overview of all the risks that may affect our business. These risks have been discussed with the Audit Committee and the Supervisory Board. Business review

34 32 Principal risks and uncertainties Risk area Commentary/Context Mitigating actions taken Strategic and Market Risks Risk related to fine-tuning of strategy and to increased competition Loss of position in organic market Organic niche market to become main stream Difficult economic environment Acquisition and divestiture risks Operational risks In 2010 we have further fine-tuned our strategic plans, focused on the European organic food market. There is a risk that we may not be able to achieve the anticipated benefits from this strategy. The risk that the organic food market becomes part of the regular food market, or Wessanen s position in the organic food market weakens due to strong competition. In 2010, the economy remained sluggish in our core countries, resulting in challenging organic food markets in grocery and particularly health food store channels. It is Wessanen s ambition to expand in the organic markets brands, through organic growth and acquisitions; these will be funded in part through divestment of non-core activities. We might be unable to acquire businesses in selected markets, leading to a risk of not meeting the strategic objectives of profitable growth. We might not be able to generate additional funds from planned divesture in non-core areas (unfavourable timing or price). In order to assess the success of our strategy and actively manage our strategic plans: We are defining Key Performance Indicators (KPIs) related to the new strategy. We monitor these on a continuous basis. We have agreed upon objectives for all corporate units and operating companies. These objectives reflect our strategic objectives. We continuously monitor the latest market developments. Some of the activities we undertake to maintain a sustainable position in the organic food market: Set up of the Organic Expertise Centre to leverage the organic knowledge base in the Company. Increase focus on innovation (new product development). Increase marketing efforts. See our Strategy and Market Review sections for more details related to our strategic and commercial activities. More stringent cost controls throughout the organisation. In order to acquire and divest business in a controlled way, Wessanen management: has a mergers & acquisitions agenda aligned with our strategy; follows clearly specified mergers & acquisitions and divestment processes, leveraging both internal and external expertise. Reliance on quality of suppliers and other external (service) providers Wessanen has outsourced many of its activities related to production and logistics. It is crucial to the Company and our consumers to have strict control over these external products and services. Close relationship with our suppliers / service providers. Quality managers in all operating companies perform inspections on products and processes. Balancing concentration for scale economies and overdependence on a limited number of suppliers or service providers. Insurance contracts to manage the financial consequences of risks. Business interruption crisis management Business continuity risk IT Operating in the food industry Wessanen runs risks related to production failure, product quality issues and product recalls. Major disruptions to our ICT systems may have a serious impact on both primary and supporting business processes. Wessanen follows food and product safety procedures and complies with food safety rules and regulations. In addition, all our operating companies are ISO 9001 and certified. At both corporate and operating company level there are continuity procedures and programmes in order to swiftly act in case of emergency. Insurance contracts to manage the financial consequences of risks. Implementing one standard ERP system (SAP) for the entire Company in order to enhance the stability and security of our ICT infrastructure. Follow security policies and Business Continuity Planning related to our ICT infrastructure. These are regularly reviewed.

35 33 Risk area Commentary/Context Mitigating actions taken Operational risks continued Inefficient processes Financial and compliance risks The risk that our processes are inefficient, negatively affecting our profitability. Ongoing monitoring of the efficiency of our processes, by using our management information (e.g. KPIs, product profitability reports and other benchmarks) coming from our core processes in operating companies. SAP will increase our ability to manage our processes more efficiently, through detailed reporting facilities. Centralisation of some selected key processes to benefit from our scale, e.g. central sourcing. Financial reporting risks With a decentralised operating model for our finance teams, there is an inherent risk of inconsistencies and misstatements in the financial statements. All finance directors of operating companies directly report to Group Finance at Wessanen and have to comply with a detailed Accounting Manual. This manual is updated and revised regularly. Financial statement closing procedures, including month end checklists, reviews by corporate accounting and control. SAP roll out creating more consistency and control. Monthly and quarterly reporting is reviewed in detail by management at operating company and corporate level. Annually, all finance directors assess the effectiveness of their controls. Business review Currency risk Wessanen conducts business in foreign currencies but publishes its financial statements and measures its performance in Euros. The Group has a foreign exchange policy that mitigates the impact of transactions in foreign currencies to functional currencies, and is based on the following principles: Transactions arising from operational and financing activities, in currencies other than the functional currency, are hedged in order to mitigate income statement volatility. All operating companies conduct their hedging transactions internally through the centralised corporate treasury department. Translation results on capital invested in foreign subsidiaries are recorded directly in retained earnings. Capital invested in and net income from foreign subsidiaries are not hedged to the Euro. Interest rate risk Wessanen s debt funding is primarily achieved through its multi-currency syndicated credit facility. Loan draw-downs bear interests at short term rates. These may fluctuate and cause income statement volatility. The Group aims to contain income statement volatility and, at the same time, minimise its financing costs. We manage our interest rate risk through closely monitoring short term and long term interest rates and where necessary modifying the interest rate exposure of debt and cash positions through the use of interest rate derivatives. For further information on interest rate risk management, please see the Note 26 on page 95. Liquidity risk In case of a shortfall of liquidity (cash and available credit) Wessanen may not be able to meet its financial obligations as they fall due. A material and sustained shortfall in our cash flow could undermine overall investor confidence and could restrict the Group s ability to raise funds. Operational cash flow provides the funds to service our financing obligations. Wessanen manages its liquidity by monitoring and forecasting cash flows of its operating companies, debt servicing requirements, dividends to shareholders, and other obligations. The Group s syndicated credit facility allows drawing in maturities ranging between a month and a year, while its other credit facilities also allow drawing for shorter periods. For further information on liquidity management, please see Note 26 on page 93. Commodity risk Wessanen requires a wide range of agricultural and other commodities for its products. Fluctuations in commodity prices may lead to volatility in net income. In addition, increases in commodity prices may lead to a reduction in margin and net income when corresponding or selling prices can not be raised. The Group uses a large variety of commodities and is not exposed to a significant concentration in one single category. In general, Wessanen aims to mitigate volatility in commodity prices by frequently entering into term price agreements with suppliers, providing sufficient time to increase the selling prices of our products.

36 34 Principal risks and uncertainties Risk area Commentary/Context Mitigating actions taken Financial and compliance risks continued Credit risk Tax risk Compliance and regulatory risk Credit risk is the risk of financial loss to Wessanen if a customer or any other counterparty to a transaction fails to meet its contractual obligations. Tax risk in a broad sense accumulates all sources of risk that may create an unexpected outcome from a tax position. Wessanen with its operating companies in Europe and North America is subject to a variety of local laws and regulations in each country in which it operates. Compliance with these laws may have an impact on our revenues and profitability and could affect our business. Doing business in a complex environment inherently means running the risk of claims and litigation with customers and suppliers. As the exposure to credit risk is influenced mainly by the individual characteristics of each customer, the spread in Wessanen s customer base reduces the impact of the credit risk. Moreover, a customer s creditworthiness is analysed frequently using benchmarks and external rating information. As a preventive control, and more and more an automated control, we manage credit risk by applying credit limits for our customers. The creditworthiness of a financial institution is assessed by their credit rating, which should be a minimum of A (Standard & Poor s). Wessanen generates taxable profits in some jurisdictions, while incurring losses in its tax accounts in others. The Group aims to achieve an effective tax rate not above the weighted average of the statutory rates in the countries of operation in three ways: we exercise prudence in our assessment of future taxable income; we use multiple planning strategies to avoid/reduce losses; we are developing strong central oversight in providing for uncertain tax positions. Our procedures and contracts should prevent the risks of legal disputes and claims with customers and suppliers as much as possible. In addition we focus on legal reviews of contracts, awareness building throughout our organisation, and monitoring and management of claims and litigation. Legal review of contracts, awareness building, and monitoring of claims and procedures. Initiatives with respect to Internal Control in 2011 Proper risk management requires continuous improvement of the set up and functioning of the control framework. As a consequence, we identified additional activities for 2011 to improve Wessanen s internal control: We will strengthen our Framework of Internal Control, i.a. by performing detailed testing of the effectiveness of our controls. Although we have clear financial reporting and operational procedures, we currently rely too much on our Entity Level Controls. We have made an improvement plan to periodically test the effectiveness of our key operational and financial reporting controls throughout the organisation. Our Internal Audit Department will execute risk based operational audits and will actively monitor actions undertaken by management to close audit findings. Continuation of SAP roll-out in Wessanen Europe should further improve control over our core processes. Implementations in the UK, France HFS and Germany are planned for Statement of Internal Control Royal Wessanen nv supports the Dutch Corporate Governance Code and makes the following declaration in accordance with best practice provision II.1.5: The Executive Board is responsible for establishing and maintaining adequate internal risk management and control systems. With respect to financial reporting, management has assessed whether the risk management and control systems provide reasonable assurance that the 2010 financial statements do not contain any material misstatements. Our assessment included tests of the design and operating effectiveness of entity level controls, and assessment of our operational controls in our operating companies. Any control weaknesses not fully remediated at year end were evaluated. Based on this assessment, management determined that the Company s financial reporting systems are adequately designed and operated effectively in Amsterdam, 23 February 2011 Executive Board Piet Hein Merckens (CEO) Frans Eelkman Rooda (CFO)

37 Sustainability 35 >9:&+0)0"*&0)&3%($:Y&-6"&4$<(&":2$*03&H:$*1)&67(&4")6&& 37")(*&67(&4")6&)9)6$0*$H%(&;""1&37$0*=&'(&$:(&7(:(&*"6&& By going for organic and making our organic brands the most desired brands in Europe, we have chosen the most sustainable food chain. We are here not only to market healthy, tasty products, but also to create a more sustainable society, for now and in the future. Sustainability and organic food form a symbiotic, mutually reinforcing partnership, since they are based on adherence to many of the same principles. Wessanen has established a strong reputation for its commitment to the principles of sustainability. We will continue to honour this commitment as we pursue our objectives within Europe s organic marketplace. Sustainability is an essential and natural part of our daily work, our businesses, our processes and our products. It is the green thread that runs through everything we do. Our organic food, your natural choice Organic products promote health and well-being, but they also hold benefits for the planet and future generations. The interest in organic food, and its importance, needs no elaboration. There is a growing awareness among consumers that organic food is not only healthy, but also a key factor in achieving a sustainable environment. However, the knowledge of consumers is still limited. One of our key challenges is to educate them clearly and effectively in the benefits of organic food. In addition to a more general approach, many of our brands explain the benefits of organic in their approach to consumers. In France for example, Bjorg advertised in daily newspaper Le Monde during the summer of 2010 highlighting the benefits of organic. Pure and friendly Organic products are made from pure ingredients which are grown and processed under environmentally-friendly and sustainable conditions. Business review As Wessanen, we are open, ethical and honest in all our activities and are keen to maintain transparent and constructive dialogue with our internal and external stakeholders. We constantly seek to balance the interests of these stakeholders, and to provide them with information that enables them to judge our performance against economic, social and environmental criteria. We are actively promoting sustainability on many fronts. We pursue and realise our sustainability convictions in different ways, like innovations, dialogue within the food chain, research, guidelines and protocols and partnerships. Our internal guidelines play a key role in these efforts as they encourage developments at product, planet, people and profit level. These commitments and investments are essential for our business operations on the one hand and our sustainability approach on the other. Our commitment to sustainability is also important for many of our employees. They feel a sense of pride at working for a company which generates its revenues through a business model that is fundamentally life-affirming. Our consumers, many of whom place sustainability high on their personal agenda, also expect us to act in accordance with the principles of sustainability. This shared concern for the environment and social justice is a cornerstone of our mutually rewarding relationship. A)$2,2*/1$B$4+,%./4$2)$,%/$ 1&'1)$,+4&/.9$1,2&1,*'D<

38 36 Sustainability Sustainability and Wessanen s Supply Chain From raw materials to consumption... Inflow of materials Production Distribution & warehousing Marketing & sales Point of sale Consumption Recycling consumer, at sustainable offices We also use these benefits of organic in the four consumer benefit platforms we have in place. We have no dedicated ethical or social consumer platform, since we consider these to be standard attributes in the other platforms. All our products are made from known ingredients. We achieve the natural taste and natural nutritional values of our food and beverages by continuously focusing on. Innovation is a must Organic products are made from pure ingredients which are grown and processed under environmentally-friendly and sustainable conditions. Creativity and innovation will continue as key factors in our efforts to meet the growing demand for safe and healthy food in the long term. The world is in need of a cohesive global policy. Wessanen is playing a responsible and pioneering role in the pursuit of this goal and with good reasons. We believe this is the only way to ensure safe, responsible organic products in the years to come. Our task is to find ways of improving and renewing our products so that they meet all the sustainability demands on the one hand and the health and flavour demands of the consumers on the other. Organic Expertise Centre (OEC) In 2010, we established an expertise centre in order to stimulate the exchange of knowledge and experience that is widely available within Wessanen. Our own specialists are the engine behind the OEC and will join forces and work on pan-european issues, such as the sourcing of certified sustainable organic palm oil. The OEC is also meant to educate and inspire our internal and external stakeholders in organic, social and ethical values. Supply chain responsibility Because we want the consumer to know what is in our products and where it comes from, we pay close attention to the sourcing of our key ingredients. We have identified our supply chain as a possible area of vulnerability in terms of sustainability. To deal with this potential weakness, we are developing a system that will deliver independently audited certification of our sources and suppliers. T8'1&./&:.7.1)$&/6$,+4&/.9$ -,,6$-,+2$&$')2:.,1.9P$ *'1&:7.'5*6$&$'1+,/4$$ +*@81&1.,/$-,+$,8+$$ Over the last few years, we have taken steps to create a framework of standards that brings our entire supply chain into alignment with our overall business principles. This goes beyond international regulation and legislation. Internationally recognised food standards combined with concrete measurable criteria regarding our business principles resulted in the Wessanen Supply Chain Audit Protocol (SCAP). The objective is to ensure that our suppliers comply with these common criteria and with our commitment to transparency and sustainability. It is the ongoing result of internal assessment. Additional support for our partners in the supply chain ensures that extra care is taken to deliver key ingredients of the highest quality. This support takes the form of, amongst others, good employment conditions, sustainable pricing (which allows farmers to improve quality and takes account of social and ecological principles at the same time), education and development, and a preference for plant-based products as an alternative to animal origin. Wessanen Company Code In our Company Code, we have general principles regarding compliance with the law; environment; product safety; free market competition; child, bonded and forced labour; and human rights. The rules govern our business decisions and actions throughout our Group and apply both to corporate actions and to behaviour of individual employees when they conduct

39 37 Organic and GMO free within our portfolio (%) 1 Organic GMO free Gender diversity in 2010 (%) 1! male! female Executive Managers Employees Wessanen Europe Grocery and Wessanen Europe HFS Wessanen s business. The rules formulate minimum requirements of behaviour, and are not all-encompassing. Wessanen wants to be a responsible partner in society, acting with integrity towards all its stakeholders and others who can be affected by its activities. Wessanen duly observes the applicable laws of the countries in which it operates. Wessanen will do all that is reasonable and practicable to minimise adverse effects on the environment which is in line with its commitment to sustainable development. We aim at all times to supply safe products and services. Wessanen supports free market competition as the basis for conducting its business and observes applicable competition laws and regulations. Wessanen will under no circumstances make use of forced or bonded labour and it will not employ children in violation of the relevant conventions of the International Labour Organisation. Wessanen supports and respects human rights and within the framework of the legitimate role of business strives to ensure that its activities do not make it accessory to infringements of human rights. Global Reporting Initiative (GRI) guidelines Over the years, we developed a robust framework, based on the GRI guidelines, to measure our performance in the areas of the four 4 P s: Product (food safety etc), Planet (environment), People (social impact) and Profit (financial), being all areas under our direct control. We also work with our suppliers and trade partners to enhance social, ethical and environmental performance within our supply chain. We report according to the GRI guidelines (GRI, G3) for which we conform to application level C. ISO Wessanen is committed to minimising its impact on the environment by measuring and monitoring the effects of its operations. ISO is an internationally recognised standard for embedding processes to analyse and reduce our impact on the environment. At Wessanen Europe Grocery and Wessanen Europe HFS, 96% of our employees were working in an ISO certified organisation in 2009, while this year we achieved 100% certification. Examples of sustainable initiatives undertaken The OEC and palm oil We currently are using only organic palm oil in all our organic brands. By the end of 2012, as initiated by our OEC, all our palm oil will be 100% certified as sustainable as well. Given the limited supply of certified sustainable and certified organic palm oil, this will count as a milestone achievement. Wessanen Netherlands and transport In 2010 the Sustainable Logistics Programme, an initiative of the Dutch Ministry of Infrastructure and the Environment, awarded us the Lean & Green Award for realising a 20% reduction in CO 2 emissions. This was achieved by training our drivers to drive more defensively, by synchronising our delivery schedules and by optimising distribution. Italian soy factory and water digester Our soy factory processes only locally grown soy beans. This supports the local economy and saves transport and energy. In 2011, we are to introduce a new water treatment technology to prevent waste and contamination. By using aerobic bacteria, we transform the used water into clean water. The produced biogas is sold to a third party to be transformed into green electricity. Kallo (UK) and its sustainable offices Kallo moved to a sustainable office in The new premises are an example of sustainable construction spearheaded by energy neutrality. The sustainability programme also includes re-use, minimum construction waste, flexibility and geo-thermal heating. Visit for additional information on sustainability, such as GRI G3 table case studies data fact sheet CSR examples Business review

40 38 Employees '())$*(*&$66$37()&2:($6&045":6$*3(&6"&H(0*2&$&2""1& (45%"#(:=&>9:&X!&)6:$6(2#&;"39)()&"*&1(+(%"50*2&$*1& $&3"45(6060+(&5(:;":4$*3(ZH$)(1&:(49*(:$60"*&5"%03#= Employee surveys To quantify our performance, we run three different surveys each year, which will deliver us the following benefits: Clear insights in current state of affairs regarding organisational capabilities, people engagement, leadership competencies and strategy awareness & trust. Engaged employees, partaking in the corporate dialogue, sharing ideas and knowledge and giving input on the engagement drivers and the action agenda. Connected management, that is firmly aware of the organisational capabilities, local engagement levels and own leadership strengths and weaknesses, grounded in the Wessanen competency and behaviour model. Shared, prioritised action agenda on barriers and opportunities for successful strategy execution. A)$2,2*/1$B$'5&+./4$2)$$ The centrally-driven general principles are focused on quality and continuity. This is reflected in our management development policy that offers employees scope for personal development. There is also a uniform remuneration policy for the management of all operating companies. Moreover, bonus systems for senior executives are drawn up centrally and are based not only on the financial targets of the operating company, but also on personal performance and the results of Wessanen. Wessanen s performance objectives are cascaded down into the personal objectives of our management group. Furthermore, the retention of experienced and talented staff is both a priority and a strategic issue. The Company Monitor assesses if our organisation, our culture and our management enables everyone to excel, if communication and best practice sharing are stimulated, and if there is sufficient focus. Based on these results follow-up plans are made and implemented at each operating company. The Engagement Monitor is rolled out amongst all Wessanen Europe employees to determine how engaged and committed our people are and what exactly drives their engagement. The participation rate in 2010 was 58%. The overall Wessanen engagement score is 6.8, which is 0.5 below benchmark. For 2011 we aim to improve on this. The differences per country are too large to define one overall improvement plan and therefore local improvement plans are set and are part of the OGSM model (Objectives Goals Strategies Measures). Thirdly, we have run the 360 Leadership Monitor, which measures if our management walk-the-talk regarding the corporate ambition and values, and if senior management is aware of and acting upon strengths and weaknesses at all levels of our organisation. From the 250 invited employees 95% participated.

41 39 Business ethics We are a responsible employer. We adhere to a Code of Conduct and operate a Whistleblower policy. In all countries where this is a legal requirement, works councils are active in our operating companies. Trade unions are consulted on important issues such as reorganisations, working conditions and health and safety. Employee development Wessanen s competency model defines behaviour expectations for all employees. The model starts from our ambitions and values, and translates these into behaviour conventions and skill sets. These competencies and functional skills also serve as the basis for selecting and developing candidates for promotion, while experience and track record are equally important criteria. We operate a variety of training initiatives to support the development of our staff. These include enhancing employee engagement and development, functional training for operations and sales, leadership training and new hire orientation training. Management Development Review Our Management Development Review is a key management process, that links individual achievements and development to short-term and long-term business challenges. The insights we gain into the strengths and weaknesses of our senior management, our talent pool, and the organisation as a whole prompts the development of action plans to ensure sufficient talent for our future needs, and establish succession plans up to the most senior levels in the organisation. OGSM The cascading and execution of our strategic and financial plans is carried out respectively monitored with a tool called OGSM (Objectives, Goals, Strategies and Measures). It brings visibility and accountability to the core objectives of the Company. It also ensures all activities are aligned with the corporate and financial goals, and that these are cascaded down to divisional or functional goals, and ultimately to the individual ones. These OGSM targets are linked with the Employee Performance Commitment targets (EPC) of all individuals from 2011 onwards. Performance management EPC is an important element in achieving the goals the Executive Board has set. It equips managers and employees with a methodology for managing and delivering outstanding individual performance. The EPC process is a continuous cycle which brings together the following key elements: Performance objective setting and review Competency & functional skills assessment Personal development planning Overall year end performance rating. The EPC supports other key processes within Wessanen, including career planning in the Management Development Reviews, identification of high potential managers, and determination of variable pay, such as the Wessanen Short Term Incentive Plan (STIP) payouts. The EPC cycle is now being deployed by nearly 95% of all employees. Employee turnover Employee turnover remains a key focus area. We strive to improve the employee turnover rate by reducing the number of people who leave on their own initiative. In 2010, this percentage amounted to 12%, a small increase versus the 11% in 2009, while still a sizeable improvement versus 16% reported in Business review Number of employees of which in the Netherlands North America In FTE, as at 31 December Europe Total 2010 Total Group 1, ,222 Wessanen Europe Grocery Wessanen Europe HFS Frozen Foods ABC Corporate centre Discontinued operations 2009 Total Group 1, ,490 5,271 Wessanen Europe Grocery Wessanen Europe HFS Frozen Foods ABC Corporate centre Discontinued operations 3,132 3,132

42 40 Governance P7(&["45$*#&7$)&$&6G"Z60(:&H"$:1&)6:9369:(=&& P7(&8B(3960+(&A"$:1&$*1&67(&K95(:+0)":#&A"$:1&& $:(&:()5"*)0H%(&;":&67(&3":5":$6(&2"+(:*$*3(&& )6:9369:(&";&67(&["45$*#=& Corporate governance at a glance Core principles The Executive Board and the Supervisory Board are responsible for the corporate governance structure of the Company. The Company complies with the principles and best practice provisions of the Dutch Corporate Governance Code with the exceptions of the best practice provisions listed on page 48 Board structure The Company has a two-tier board structure comprising: Executive Board with two members (Chairman & CEO and CFO) Supervisory Board with three members (one Chairman, one Vice-Chairman and one member) Board committees The Board Committees are: Audit Committee held four meetings during 2010 Selection Appointment and Remuneration Committee held three meetings during 2010 Board composition The members of the Executive Board and the Supervisory Board and the Board Committees can be found on page 41 Report of the Supervisory Board The report of the Supervisory Board describes the activities of the Supervisory Board and the different Board Committees. The report can be found on pages 49 to 52

43 Biographies and management structure 41 Supervisory Board Executive Board F.H.J. (Frans) Koffrie, Chairman Male, Dutch nationality, 1952 Member of the Audit Committee and of the Selection, Appointment and Remuneration Committee. Former Chairman and CEO of Corporate Express nv. First appointment to the Supervisory Board in 2001; current term will expire in Mr Koffrie does not hold shares in the Company. P.H. (Piet Hein) Merckens, Chairman Male, Dutch nationality, 1962 Joined Wessanen in April Became CEO on 1 June 2010; current term will expire in Former positions are President of D.E. Netherlands, Poland and Greece, Business Unit Director at Douwe Egberts Netherlands and Associate Director for the Food Channel and Paper Category at Procter & Gamble Benelux. J.G.A.J. (Jo) Hautvast, Member Male, Dutch nationality, 1938 Chairman of the Selection, Appointment and Remuneration Committee. Former Vice President Health Council of the Netherlands, former General-Director Wageningen Centre for Food Sciences. Chairman Advisory Board Risk Assessment Netherlands Food Safety Authority, first appointed to the Supervisory Board in 2004; current term will expire in Mr Hautvast does not hold shares in the Company. F.E. (Frans) Eelkman Rooda, CFO Male, Dutch nationality, 1952 Joined Wessanen in 2008 as CFO. Mr Eelkman Rooda will resign on or before 31 May Former positions are amongst others CFO of OPG Group N.V. and Principal with McKinsey & Company (Amsterdam). Additional positions include member of the Supervisory Boards of De Lage Landen International B.V. and OctoPlus N.V. Governance F. (Frank) van Oers, Member Male, Dutch nationality, 1959 Chairman of the Audit Committee. CEO of Sara Lee International Beverage & Bakery division and Executive Vice President of Sara Lee Corporation; first appointment to the Supervisory Board in 2009; current term will expire in Mr Van Oers does not hold shares in the Company.

44 42 Biographies and management structure Management structure Supervisory Board Executive Board Corporate Staff Wessanen Europe Grocery Wessanen Europe HFS Frozen Foods American Beverage Corporation France France Beckers Benelux Favory Convenience Food Group (64.1%) UK UK Germany Germany Benelux Benelux Italy Managed by EMG Executive Management Group (EMG) Wessanen Europe Grocery and HFS Piet Hein Merckens (1962), CEO (chair) Frans Eelkman Rooda (1952), CFO Fred Alkemade (1961), EVP Strategy, Sourcing and New Business Development Christophe Barnouin (1968), Strategic Coordinator Grocery and Managing Director France Henk van den Bogaart (1958), EVP Human Resources Patrick Cairns (1967), Managing Director UK Jeremy Deacon (1960), Strategic Coordinator HFS and Managing Director Benelux Frank von Glan (1962), Managing Director Germany Heidi van der Kooij (1962), EVP General Counsel and Company Secretary Fons de Vries (1953), EVP Supply Chain and ICT

45 Corporate governance 43 P70)&)(360"*&3"*6$0*)&$*&"+(:+0(G&";&'())$*(*.)& 3":5":$6(&2"+(:*$*3(&)6:9369:(=&E6&0*3%91()& 0*;":4$60"*&:(_90:(1&9*1(:&67(&]9637&[":5":$6(& F"+(:*$*3(&["1(&,67(&["1(/ N =& The corporate governance principles we employ are documented in the Articles of Association of the Company and policy documents published on the Corporate Governance section of the website of the Company (). The Executive Board and the Supervisory Board are responsible for the corporate governance structure of the Company and are of the opinion that all of the principles of the Code are endorsed and the vast majority of the best practice provisions are applied. Any best practice provisions of the Code that are not or not fully applied and the reasons for these deviations are set out below. A summary of best practice provisions that are not (fully) applied by the Company can be found on page 48. Governance structure Royal Wessanen nv ( Wessanen ) is a public company ( naamloze vennootschap ), under Dutch law with a two-tier board structure. It is managed by an Executive Board, which is supervised and advised by the Supervisory Board. Wessanen has a structure that allows it to best execute its strategy and to balance local and international decision-making. omtrent de inhoud van de jaarrekening ) and as amended on 10 December 2009, can be found on the Company s website in the section Corporate Governance. Executive Board General The Executive Board is responsible for the management and general affairs of Wessanen. For a more detailed description of its responsibilities, please refer to the By-Laws Executive Board that are published on the Company s website. The Executive Board consists of two members who have collective powers and responsibilities. They share responsibility for managing the Company, determining and deploying its strategy and policies, achieving its objectives and results and developing a sound personnel policy. The Executive Board is accountable for the performance of its assignment to the Supervisory Board and to the General Meeting of Shareholders. In discharging its duty, the Executive Board focuses on the interests of the Company, taking into consideration the interests of its shareholders and other capital providers, employees, customers and suppliers. Governance At the Annual General Meeting of Shareholders (AGM) held in April 2004, the Executive Board and the Supervisory Board reported on the then current corporate governance structure of the Company. Further changes to the corporate governance structure were discussed in AGM s in consecutive years, latest in April Although no formal vote was cast, it appeared that the corporate governance structure was implicitly approved by these meetings. After the AGM held in April 2010, no amendments were made to the corporate governance structure. Substantial changes in the corporate governance structure will be submitted to the General Meeting of Shareholders for consideration. The Corporate Governance Statement ( Corporate-Governanceverklaring ) as determined in the Decree of 23 December 2004 regarding the implementation of further accounting standards for the content of annual reports ( Besluit van 23 December 2004 tot vaststelling van nadere voorschriften F8+$2,2*/1$B$&/$,+4&/.9$'/&9>$ 68+./4$&$2**1./4$:+*&>;< 1 The corporate Governance Code was last amended on 10 December 2008 and can be found on the website of the Dutch corporate governance committee (

46 44 Corporate governance Retirement and possible reappointment schedule (as of 1 June 2010): Name First appointment Latest re-appointment Current term expires P.H. Merckens F.E. Eelkman Rooda Mr Eelkman Rooda will resign as CFO of the Company on or before 31 May 2011 Information about individual Executive Board members is published on page 41. Risk management approach The Executive Board is responsible for ensuring compliance with all relevant legislation and regulations. It is responsible for proper financing of the Company and for managing the risks attached to the Company s activities. The Executive Board reports on and accounts for internal risk management and control systems to the Supervisory Board and the Audit Committee. Term of appointment The current members of the Executive Board are appointed for a term of four years. The composition of the Executive Board, its performance, as well as the performance of individual members of the Executive Board, are reviewed annually by the Supervisory Board. Determination and disclosure of remuneration of the Executive Board The Remuneration Report compiled by the Supervisory Board explains the Company s remuneration policy for members of the Executive Board for the next financial year and subsequent years and contains an account of the manner in which the remuneration policy has been implemented in the reporting year (see pages 53 to 57). The remuneration policy presented in the Remuneration Report was adopted by the 2006 AGM and last amended by the 2010 AGM. Any material amendments to the remuneration policy will be submitted for adoption to the General Meeting of Shareholders. Determining the remuneration for individual Executive Board members is a responsibility of the Supervisory Board, who is assisted by the SARC. Remuneration of the individual members of the Executive Board is consistent with the Remuneration Policy. The Supervisory Board has decided not to apply best practice provision II.2.8 of the Code which provides that the maximum remuneration in case of dismissal of a member of the Executive Board shall not exceed one year s salary. As explained in the Remuneration Policy, in cases where the dismissal is a result of a change of control over the Company, the severance pay consists of one year s salary plus pay-out of the short term cash incentive at target, plus the cash equivalent of the exercise value of all outstanding performance shares. Supervisory Board General The Supervisory Board supervises the policies of the Executive Board and the general course of affairs of Wessanen and advises the Executive Board on these matters. In doing so, the Supervisory Board is guided by the interests of the Company and the relevant interests of the Company s stakeholders. The Supervisory Board supervises and advises the Executive Board in performing its management tasks and setting the direction of the Group s business. Major decisions and the Group s strategy are discussed with the Supervisory Board. The Supervisory Board report describes the activities of the Supervisory Board and its committees in the financial year and the main items discussed. Information about the individual data on the Supervisory Board members is published on page 41. Independence, expertise, composition and term of appointment The Supervisory Board, in the two-tier corporate structure applicable under Dutch law, is a separate body that is independent of the Executive Board. The Supervisory Board considers its members to be independent as defined in the By-Laws of the Supervisory Board and in the Code, with the exception of one member. Wessanen does not follow the best practice provision in the Dutch Corporate Governance Code which provides that the chairman of a supervisory board may not be a former member of the management board of the company. The reasons for not applying this provision are that the Chairman of the Supervisory Board, Mr Koffrie, served as CEO of the Company for a relatively brief period of 15 months and that his extensive experience in leading large international companies makes him an excellent candidate to take up the chair. The By-Laws of the Supervisory Board that are posted on the Company s website stipulate the qualification requirements for individual members of the Supervisory Board and the requirements for the composition of the Supervisory Board. The Supervisory Board consists of at least three members. Term of appointment Members of the Supervisory Board are appointed for a term of four years. Supervisory Board members may in principle serve a maximum of three terms of four years each on the Supervisory Board. Composition and role of the Committees of the Supervisory Board The Supervisory Board, while retaining overall responsibility, has delegated certain tasks to the Audit Committee and the SARC. Specific information about the committees, including the Committee Charters, is published on the Company s website. The main purpose of these Committees is to prepare the foundations that support the decision-making processes of the

47 45 Retirement and possible re-appointment schedule (as of 1 June 2010): Name First appointment Latest re-appointment Current term expires Re-appointed possible? F.H.J. Koffrie No J.G.A.J. Hautvast Yes F. van Oers Yes 1 Mr Koffrie was first appointed in 2001 and served two terms of four years. In 2009, he resigned from the Supervisory Board and was appointed member of the Executive Board and CEO for an interim period. In 2010, he was re-appointed member of the Supervisory Board for a (last) term of four years. Supervisory Board. In its report, the Supervisory Board describes the duties of the Committees that have been carried out in the financial reporting year. Audit Committee The Audit Committee consists of at least two members, at least one of whom shall be qualified as a financial expert as defined in the By-Laws of the Supervisory Board and the Audit Committee Charter. The Audit Committee assists the Supervisory Board in fulfilling its oversight responsibilities in relation to: the Company s accounting and financial reporting practice, policies and procedures (including judgments and estimates, significant reporting issues material adjustments and the robustness of the processes) the quality of the Company s internal control systems and risk assessment (understanding the risks the Company is exposed to and how they are effectively dealt with, and oversight of the internal audit function) the quality of disclosure controls and procedures the integrity of the financial statements the performance and evaluation (including its independence) of the External Auditor and advice on the appointment and replacement of the External Auditor compliance with laws and regulations. Selection, Appointment and Remuneration Committee (SARC) The SARC consists of at least two members and assists the Supervisory Board with the following tasks: reviewing the Remuneration Policy for members of the Executive Board drafting the Remuneration Report making proposals for remuneration of individual members of the Executive Board reviewing share-based compensation schemes assessing the composition and performance of the Executive Board and the Supervisory Board and advising on selection criteria and appointment procedures reviewing selection criteria, appointment procedures and compensation structure of the Company s top management. The remuneration of a Supervisory Board member is not dependent on the results of the Company. The Remuneration Report (see pages 53 to 57) contains information on the level and structure of the remuneration for individual Supervisory Board members. Conflicts of interests In compliance with the Code, the Company has formalised strict rules to avoid conflicts of interests between the Company on the one hand and individual members of the Executive Board and Supervisory Board on the other hand. Decisions to engage in transactions in which interests of Board members play a role, which have a material significance for the Company and/or for the Board member concerned, require approval by the Supervisory Board. The Supervisory Board is responsible for taking decisions on handling conflicts of interest between the Company and members of the Executive Board and Supervisory Board, major shareholders and the External Auditor. No conflicts of interests were reported in The General Meeting of Shareholders General A General Meeting of Shareholders is held at least once a year not later than six months after the end of our financial year. Subject to the provisions in sections 2:110 and 2:111 of the Netherlands Civil Code, meetings Governance Given the size of the Supervisory Board, it was decided to combine the tasks in the area of Executive and Supervisory Board nomination and remuneration policy into one Committee. Remuneration of the Supervisory Board The General Meeting of Shareholders determines the remuneration of the Supervisory Board members. A)$2,2*/1$B$:8)./4$2)'*7-$ &/$K77,'$4+**/$1*&$:&+D<

48 46 Corporate governance may be convened by the Supervisory Board or the Executive Board and must be held if shareholders jointly representing at least 10% of the outstanding share capital make a written request to that effect to the Supervisory Board and the Executive Board, specifying in detail the business to be dealt with. Shareholder meetings; Voting rights General Meetings of Shareholders shall be convened by the Supervisory Board or the Executive Board. The convocation shall take place no later than the forty-second day prior to the date of the meeting and shall be carried out by means of a notice on our website. The notice of the meeting shall, inter alia, state the requirement for admission to the meeting and the way in which proxies and voting instructions can be exercised. Pursuant to the Articles of Association, each share is entitled to one vote in all matters properly brought before the General Meeting of Shareholders of Wessanen. Unless the Articles of Association or mandatory law provides otherwise, all shareholders resolutions require an absolute majority of the votes cast. Powers General Decisions of the Executive Board on a major change in the identity or the character of the Company are submitted for approval by the General Meeting of Shareholders. For example, Wessanen has called an extraordinary General Meeting of Shareholders which was held in January 2010, to ask for shareholders approval for the sale of the Tree of Life, Inc. The most important powers of the General Meeting of Shareholders of Royal Wessanen nv are: Adoption of financial statements, including appropriation of the results Determination of dividend in accordance with the provisions of the Articles of Association Granting discharge to the Executive Board and the Supervisory Board Appointment, suspension and dismissal of the members of the Executive Board and the Supervisory Board in accordance with the provisions of the Articles of Association Adoption of the remuneration policy for the Executive Board Determination of the remuneration for members of the Supervisory Board Approval of the share based remuneration plan for members of the Executive Board Appointment and dismissal of the External Auditor Designation of the Executive Board for a specified period as authorised body to issue shares and to grant rights to subscribe for shares (option rights) Amendment of the Articles of Association pursuant to the proposal by the Executive Board and subject to the approval of the Supervisory Board, by absolute majority of the votes cast Authorisation of the Executive Board for the Company to purchase its own shares. Substantial amendments to the corporate governance structure and amendments to the Dividend Policy will also be presented to the General Meeting of Shareholders. The right to place an item on the agenda Shareholders may request the Executive Board or Supervisory Board that certain items be placed on the agenda of the General Meeting of Shareholders. These requests will be granted if they: (i) are submitted at least 60 days before the General Meeting of Shareholders by (ii) shareholders, who, on their own or together, represent at least 1% of our issued capital or whose shares on the date of the announcement of the meeting have a market value of at least EUR 50,000,000 and (iii) assuming that there are no important interests of the Company that could prevent them being placed on the agenda. Appointment of Executive Board and Supervisory Board The appointment of members of the Executive Board and of the Supervisory Board shall be made following a non-binding nomination by the Supervisory Board. A resolution of the General Meeting of Shareholders to approve an appointment in accordance with a nomination by the Supervisory Board requires an absolute majority of the votes cast. In the event of a candidate nominated by the Supervisory Board not being appointed by the General Meeting of Shareholders, the Supervisory Board will nominate a new candidate. Shareholders who have the right to place an item on the agenda of the General Meeting of Shareholders are also entitled to nominate a candidate. A resolution of the General Meeting to appoint a member of the Executive Board or of the Supervisory Board other than in accordance with a nomination by the Supervisory Board requires an absolute majority of the votes cast representing more than one-third of the issued capital. At a General Meeting of Shareholders, votes can only be cast for candidates named in the agenda or explanatory notes of the meeting. The General Meeting of Shareholders may decide to suspend or remove a member of the Executive Board or the Supervisory Board. A resolution of the General Meeting of Shareholders to suspend or remove a Board member that is not in accordance with a proposal of the Supervisory Board requires an absolute majority of the votes cast representing more than one-third of the issued capital. Dividends The proposed dividend for a financial year must be approved by the General Meeting of Shareholders, which is usually held in April of the following financial year, and the dividend is paid after this meeting. Dividend payments are only allowed to the extent that the shareholders equity is in excess of the sum of the paid-up capital and any reserves required under Dutch law. Dividend payments shall be made not later than fourteen days after adoption of the dividend.

49 47 The Executive Board, with the approval of the Supervisory Board, determines which part of the profit is to be appropriated to the reserves. The remaining profit may be distributed as a dividend to the holders of the shares. The General Meeting of Shareholders may, at the proposal of the Executive Board which has been approved by the Supervisory Board, resolve that a payment of dividend be wholly or partly in shares. If a loss is sustained in any year, no dividend shall be distributed for that year and for subsequent years until the loss has been defrayed out of the profit. The General Meeting may however resolve on a motion of the Executive Board which has been approved by the Supervisory Board, to defray any such loss out of the distributable part of the shareholders equity or to charge the dividend to the distributable part of the shareholders equity. The dividend policy of the Company is described on page 114. Description of share capital and Articles of Association General The Company s Articles of Association were last amended by a notarial deed dated 23 April The Company s head office is at Hoogoorddreef 5, Amsterdam Zuidoost and the Company s registered seat is Amsterdam. The Company is registered at the Trade Register of the Chamber of Commerce of Amsterdam under file number Unless Dutch law prescribes otherwise, Wessanen shareholders have pro rata pre-emptive rights to subscribe for new issuances of shares. These pre-emptive rights may, subject to the prior approval of the Supervisory Board, be restricted or excluded by the corporate body that is authorised to issue shares. At the Annual General Meeting of Shareholders held on 14 April 2010 the Executive Board was authorised to restrict or exclude such pre-emptive rights in the event of issuances of or granting of rights to subscribe for shares up to 13 October 2011, subject to the prior approval of the Supervisory Board. Repurchase of shares The Company may repurchase its own shares, subject to certain provisions of Dutch law and the Articles of Association. The Company may not repurchase its own shares if (i) the payment required to make the repurchase would reduce shareholders equity to an amount less than the sum of paid-in and called portions of the share capital and any reserves required by law or our Articles of Association or (ii) the Company and its subsidiaries would thereafter hold shares with an aggregate nominal value Governance Share capital As of 31 December 2010, our authorised share capital amounted to EUR 300 million divided into 300,000,000 shares, with a nominal value of EUR 1.00 per share each. All shares are registered shares and can be included in the deposit system of the Act on deposit securities transactions ( Wet giraal effectenverkeer ). As of 31 December 2010, the issued share capital was divided into 75,195,015 shares all of which have been fully paid up. The issued share capital was increased from 68,359,105 in March 2010 following an equity offering of 9.99% of the then issued capital. Issue of shares; Pre-emptive rights The authority to issue shares has partly been designated by the General Meeting of Shareholders to the Executive Board pursuant to a resolution dated 14 April The Executive Board is authorised to issue shares up to a maximum of 10% of the issued share capital, which percentage is extended by an additional 10% of the issued share capital in the event that the issue is related to a merger or an acquisition. The authority of the Executive Board to issue shares will terminate on 13 October 2011 unless it is extended by a resolution of the General Meeting of Shareholders. Prior approval of the Supervisory Board will be required for any Executive Board resolution to issue shares. A)$2,2*/1$B$C5,7*$?&+15$ 9*+*&7'$&'$&/$./U:*1%**/;<

50 48 Corporate governance Soya Most of our soya milk products are produced at BioSlym, Wessanen s Italian soya factory. equal to more than 10% of the issued share capital. Shares owned by the Company may not be voted. Any repurchase of shares that are not fully paid-up is null and void. A repurchase of shares may be effected by the Executive Board if the Executive Board has been so authorised by the General Meeting of Shareholders, which authorisation may not be granted for a period of more than 18 months. Most recently, the General Meeting of Shareholders granted this authorisation until 13 October 2011 by resolution dated 14 April Capital reduction Upon the proposal of the Executive Board and subject to the approval of the Supervisory Board, the General Meeting of Shareholders may resolve to reduce Wessanen s issued share capital by cancellation of shares or by reducing the nominal value of the shares through amendment of the Articles of Association, subject to certain statutory provisions and the provisions of the Articles of Association. Restriction of non-dutch shareholders rights Under the Company s Articles of Association, there are no limitations on the rights of non-resident or foreign shareholders to hold or exercise voting rights in respect of securities in the Company, and we are not aware of any such restrictions under Dutch corporate law. Disclosure of share ownership Dutch law (The Act of Financial Supervision) requires public disclosure to the (Dutch) Authority Financial Markets (AFM) with respect to the (potential) ownership of and (potential) voting rights on listed shares when the following thresholds are passed: 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75% and 95%. On or before 31 December 2010 the following entities had reported a direct or indirect substantial holding of shares in the capital of the Company: Delta Partners, LLC (16.33%) Prism Offshore Fund, Ltd (5.89%) Sparinvest Fondsmaeglerselskab A/S (5.58%) Provision of information In accordance with the Dutch Act of Financial Supervision, Wessanen will ensure that any public communications of non-public price-sensitive information about the Company will be disclosed without delay to the general public and is factual and accurate. Principles to ascertain this are included in the Company s Disclosure Policy which is posted on the Company s website. Audit of financial reporting and role of Internal and External Auditors The general Meeting of Shareholders appoints the External Auditor. The Audit Committee recommends to the Supervisory Board the External Auditor to be proposed for reappointment by the General meeting of Shareholders. In addition, the Audit Committee evaluates and where appropriate recommends replacement of the External Auditor and approves its remuneration after consultation with the Executive Board. On 14 April 2010, the General Meeting of Shareholders appointed Deloitte Accountants BV as external auditors for the Company for the financial year External Auditor policy Wessanen has established a policy for the independence of and provision of services by its external auditors. This policy stipulates that external auditors may only provide services which do not conflict with its independence and which are explicitly listed in the policy. The External Auditor policy is posted on our website. Relationship and communication of the External Auditor with the bodies of the Company The External Auditor attends the meeting of the Supervisory Board in which the financial statements are approved and all meetings of the Audit Committee. The functioning of the External Auditor is assessed annually. In 2014 the Company will conduct a thorough assessment of the External Auditor s functioning, the main conclusions of which will be shared in the following General Meeting of Shareholders. Compliance with the Dutch Corporate Governance Code The Company fully complies with the Dutch Corporate Governance Code by either applying its principles and best practice provisions or by explaining why it deviates from the Code. Such principles and best practice provisions are fully applied with the exception of the following provision that is not fully applied for reasons set out above: best practice provision II.2.8 (severance payment in change of control situation); best practice provision III.4.2 (chairman of the supervisory board may not be a former member of the management board).

51 Report of the Supervisory Board 49 Activities of the Supervisory Board During the reporting year, the Supervisory Board met seven times. Management presented and we discussed with them actions to further refine the strategy as well as strategic objectives, which are explained in detail in the section Strategy (pages 9-11). We endorsed management s proposals and believe the Company is heading in the right direction with a very good approach and ambitious timing. Day-to-day business and quarterly results were discussed on a regular basis. We were kept informed about the progress made with the implementation of the ERP system (SAP) in the organisation, which is very satisfactory and a considerable, but productive investment. We discussed the most important risks related to the business of the Group as well as the functioning of the Company s risk management and control systems, notably in the light of the reporting irregularities in the US discovered in We agreed with management on actions to be taken to reinforce management and internal control systems. Governance In January the sale of Tree of Life, Inc., our North American distribution business to Kehe Food Distributors was completed. In December we approved the sale of our US subsidiary PANOS Brands, which was signed and closed before year end. Both divestments are in line with Wessanen s strategic transition to a group focused on the European organic food market. The purchase agreement for the divestment of Tree of Life provided that the purchase price was subject to adjustment for available cash and debt, a working capital adjustment and a potential downward adjustment on the basis of normalised 2009 EBITDA of Tree of Life. Based on this provision in the agreement, Kehe claimed compensation for downward adjustments for normalised EBITDA and for working capital. Wessanen disputed Kehe s claim and the dispute was submitted to an arbitrator, who ruled on the various items on average in the middle of the positions taken by the parties. This resulted in a cash payment to Kehe of USD 8 million in the fourth quarter. A)$2,2*/1$B$&/$K77,'$$ :.'98.1$-+,2$4+&/66&6D< Regular reports were received from the Audit Committee and the Selection, Appointment and Remuneration Committee (SARC) on matters addressed in their meetings. The independence and performance of the External Auditor was assessed, as well as their relationship with management and the Audit Committee. With the External Auditor we discussed their report on the 2009 Financial Statements. We reviewed and discussed the

52 50 Report of the Supervisory Board Annual Report for Following the transformation of the Company to a business focusing on the European organic foods market, Wessanen is revisiting its business and financial processes and procedures to fit the new organisation. In light of these changes, the Company has decided that it may benefit from a fresh perspective on existing processes and procedures by appointing a new external audit firm, to help this transition. This resulted in the proposal to the General Meeting of Shareholders 2010 to assign the audit of the 2010 Financial Statements to Deloitte Accountants BV. We also reviewed the financing of the Company and approved management s proposal to issue up to 6.8 million ordinary shares representing 10% of the issued capital, which was effected in March We reviewed the Remuneration Policy and concluded that no material changes were required to the existing policy for 2010, with the exception of the long-term incentive plan, to which we proposed to the 2010 AGM to make two changes. These changes were adopted by the AGM and are explained in detail in the Remuneration Report. At the end of the year, we agreed with Mr Eelkman Rooda that he will step down as CFO of the Company on or before 31 May 2011 and approved the termination agreement (see in more detail the paragraph Composition of the Supervisory Board and the Executive Board below). We also discussed our own functioning and that of the Board committees, while taking into account our profile, composition and the competencies of each of the members of the Supervisory Board. The Chairman of the Supervisory Board discussed with each of the members of the Board their opinion on the functioning of the Board and the Board committees. Composition of the Supervisory Board and the Executive Board Supervisory Board During the reporting year, the composition of the Supervisory Board was as follows: Durk Jager (Chairman) (until 28 July 2010) Jo Hautvast Frans H.J. Koffrie (from 1 June 2010 and Chairman from 28 July 2010) Theo de Kool (until 14 April 2010) Frank van Oers All members of the Supervisory Board are qualified as independent under the definition in the Supervisory Board By-Laws with the exception of Frans Koffrie, who was interim CEO of Wessanen for a period of 15 months, ending on 1 June For biographies of the current members of the Supervisory Board, please refer to page 41. In July 2010 Mr Jager resigned from the Board for personal reasons. The Supervisory Board and the Executive Board are grateful to Mr Jager for his service to the Supervisory Board for more than five years. As Chairman of the Board he contributed greatly to the discussions and decisionmaking of the Supervisory Board, provided advice to the Executive Board and showed leadership when this was required in difficult times. Mr Koffrie first became a member of Wessanen s Supervisory Board in In February 2009 he stepped down to become interim CEO of Wessanen, a position he held until 1 June of this year when he was succeeded by Piet Hein Merckens. The AGM held in April 2010 re-appointed Mr Koffrie as a member of the Supervisory Board for a final term of four years. He has taken up the position of Chairman upon Mr Jager s resignation. In appointing Mr Koffrie as Chairman of the Supervisory Board, Wessanen did not follow the best practice provision in the Dutch Corporate Governance Code which provides that the chairman of a supervisory board may not be a former member of the executive board of the company. The reasons for not applying this provision are that Mr Koffrie served as CEO of the Company for a relatively brief period only and that with his extensive experience in leading large international companies Mr Koffrie was considered an excellent candidate to chair the Supervisory Board. Changes to the Supervisory Board envisaged for 2011 After the resignation of Mr Jager, the composition of the Supervisory Board, now consisting of three members, has been reviewed in light of the strategy review and long term aspirations of the Company, as well as the profile of the Supervisory Board. After consultation with management, the Board considered that it is in the interests of the Company to continue to be composed of four members. A search for a new member of the Board is being conducted. Executive Board During the reporting year, the composition of the Executive Board was as follows: Frans Koffrie (Chairman and CEO, until 1 June 2010) Frans Eelkman Rooda Piet Hein Merckens (from 14 April 2010 and Chairman and CEO from 1 June 2010) Mr Koffrie was appointed to the Executive Board and interim CEO in April 2009 with the mandate to define a clear strategy for the Company and to reduce Company debt. At the proposal of the Supervisory Board, the 2010 AGM re-appointed him for a brief period, until 1 June 2010, in order to hand over to Mr Merckens. Piet Hein Merckens was appointed to the Executive Board by the AGM in April 2010 and became CEO and Chairman of the Executive Board on 1 June We agreed with Mr Eelkman Rooda that he will step down as CFO of the Company on or before 31 May This decision was inspired by the fact that a change of financial leadership would be appropriate, given the significant transformation the Company has undergone in the past

53 51 two years, which leads to a focus on the European organic food market. The Supervisory Board is grateful to Mr Eelkman Rooda for his valuable contribution to the transformation process of the Company since he joined in A search for a new CFO is in progress. Committees of the Supervisory Board Without prejudice to its own responsibility, the Supervisory Board has formed two committees, the Audit Committee and the Selection, Appointment and Remuneration Committee (SARC), each consisting of members of the Board. The purpose of these committees is described in the Corporate Governance section (pages 43 to 48). Audit Committee The Audit Committee met four times during the reporting year. It reviewed the quarterly and annual results paying particular attention to non-recurring items, the classification of specific units as discontinued operations and critical accounting policies. The Audit Committee discussed several reporting issues and general compliance with reporting regulations. It discussed actions to further strengthen the internal control framework as well as the risk profile of the Company. Certain aspects of the Company s management reporting system were also discussed, such as new amended reporting standards and revised segmentation in external financial reporting, following the instalment, in addition to the management structure by country, of a management overlay by sales channel within Wessanen Europe, i.e. grocery and health food stores. The Audit Committee closely followed further implementation of the remediation programme concerning internal control throughout the Group (following the reporting irregularities at ABC discovered in 2009). The Audit Committee reviewed the 2010 audit report and discussed the performance of the External Auditor, was involved in the selection of the new External Auditor of the Company and discussed with the new External Auditor the audit approach and management letter. The Audit Committee reviewed management s response to the management letter. The Audit Committee also had regular discussions with the External Auditor in the absence of management. The Audit Committee closely followed the rebuilding of the internal audit function and reviewed the audit planning for It approved a charter for the internal audit function and discussed the follow-up actions of issues raised by the external auditor, by the internal audit function and through risk self-assessments. Attention was paid to legal and tax issues, as well as compliance. The Audit Committee also discussed the Company s refinancing, in particular the equity issue in March The composition of the Audit Committee is described on page 41. Messrs Van Oers and Koffrie both qualify as financial expert as defined in the By-Laws of the Supervisory Board and the Audit Committee Charter. All meetings of the Audit Committee during the reporting year were attended by the External Auditor as well as by representatives of management and the finance function. Selection, Appointment and Remuneration Committee (SARC) During the reporting year, the SARC met three times. It made the proposal to the Supervisory Board to appoint Piet Hein Merckens to the Executive Board and discussed the composition of the Executive Board as well as the Supervisory Board, to which it proposed to appoint Frans Koffrie after his resignation as CEO. The SARC approved the pay-out to members of the Executive Board under the Short Term Incentive Plan 2009 and reviewed the Remuneration Policy 2010 to which it proposed amendments that were approved by the 2010 AGM. It also reviewed the Remuneration Report over The SARC approved the proposal for the granting of shares to Executive Board members under the LTIP 2010 programme and discussed the approach to assess possible payments under the current STIP and LTIP programs in different scenarios. The SARC reviewed and discussed the contract and remuneration for Piet Hein Merckens. It discussed the approach for evaluation of the Boards and made a recommendation to the Supervisory Board in this respect. The severance payment to Mr A. Veenhof was discussed and approved. The composition of the SARC during the reporting year is described on page 41. Corporate Governance The corporate governance structure of Wessanen is described in the Corporate Governance section in this Report. We endorse the principles and apply almost all of the best practice provisions of the Dutch Corporate Governance Code (the Code). Any provisions of the Code not applied have been disclosed and explained in the Corporate Governance section. The corporate governance structure of the Company was last discussed at the Annual General Meeting of Shareholders in April 2010 and has not changed since in any material respect. Remuneration Report The Remuneration Report incorporates the principal points of the remuneration policy for members of the Executive Board as well as the full remuneration of the individual members of the Executive Board. The Remuneration Report forms part of, and is incorporated in, the Report of the Supervisory Board (see pages 53 to 57). Governance

54 52 Report of the Supervisory Board The dividend proposal to the Annual General Meeting of Shareholders to be held on 19 April 2011 is included in the Annual Report on page 106. The dividend of EUR 0.05 per share will be paid either wholly in cash or in new shares at the option of the shareholder. The dividend proposal is in line with the dividend policy of the Company (on page 114). Discharge We also propose that the Annual General Meeting of Shareholders, in accordance with Article 30, Paragraph 2 of the Articles of Association, discharges the Executive Board from management as carried out in the past financial year and the Supervisory Board from its supervision. A)$2,2*/1$B$*/E,)./4$&$=&+1*N$ 0*4*1&+.&/$@&1V$'&/6%.95;< Financial Statements and allocation of results This Annual Report which has been prepared by the Executive Board and presented to the Supervisory Board, consists of the Consolidated Financial Statements, the Financial Statements of Royal Wessanen nv and the management report for The 2010 Financial Statements have been audited by our External Auditor Deloitte Accountants B.V. The report of the External Auditor can be found on page 107 of this report. The management report includes a statement by the Executive Board which confirms that the Financial Statements in this Annual Report give a true and fair view of the assets and liabilities and financial position as at 31 December 2010, and that the management report includes a fair review of the development and performance of the business of the Company, including its principal risks and uncertainties. The External Auditor s report includes an attestation to this management assessment. The Supervisory Board would like to express its appreciation for the continued dedication and efforts of the Executive Board and all Wessanen employees. Supervisory Board Amsterdam, 23 February 2011 Frans Koffrie Jo Hautvast Frank van Oers We have reviewed and discussed these reports and the report of the External Auditor relating to the audit of the Financial Statements with the Audit Committee in the presence of the Executive Board and the External Auditor. The Supervisory Board recommends that the Annual General Meeting of Shareholders to be held on 19 April 2011 adopts the Financial Statements included in this Annual Report accordingly.

55 Remuneration report 53 Remuneration Policy regarding the Executive Board and the Supervisory Board The Supervisory Board is responsible for implementing the Remuneration Policy and determining the remuneration of individual members of the Executive Board and Supervisory Board. The Supervisory Board may, if necessary, deviate from the policy if market circumstances make it necessary or the application of the policy is considered to be unreasonable. Any deviation from the Remuneration Policy will be accounted for in the Annual Report. The Supervisory Board has delegated its responsibility vis-à-vis Executive Board remuneration to the Selection, Appointment & Remuneration Committee (SARC). Every year, the SARC assesses whether the Remuneration Policy is still consistent with the objectives of the Company and whether an adjustment of the terms of employment for members of the Executive Board is appropriate. Scenario analyses serve as input for the review of the remuneration policy. Any material changes to the Remuneration Policy will be submitted to the General Meeting of Shareholders for approval. Details of remuneration of Executive Board Members The total direct compensation for members of the Executive Board is set at median level relative to the labour market peer group. To ensure the attraction and retention of highly skilled and qualified managers, Wessanen aims for a total remuneration level that is comparable to levels provided by other Dutch multinational corporations that are similar to Wessanen in terms of size and complexity. For that purpose, external reference data are used. These reference data include remuneration data from Dutch companies operating internationally in the same sector (food, food ingredients, distribution, retail), and in the practices of AMX-listed companies which are similar to Wessanen in size and complexity. If a member of the Executive Board is not Dutch and resides outside the Netherlands the base salary is set against the reference market of that country. The main elements of a contract of a member of the Executive Board are made public no later than on the date of the notice calling the General Meeting of Shareholders where the appointment of the member of the Executive Board will be proposed. The Remuneration Policy in general The objective of the Remuneration Policy is to attract, motivate and retain experienced directors with an international outlook, and reward them appropriately for their ability to achieve stretched targets for short-term and long-term performance. Governance The structure of the remuneration package for the Executive Board is designed to balance short-term operational performance with the long-term objective of creating sustainable value within the Company. The Remuneration Policy for the members of the Executive Board is aligned with the remuneration structure of other senior executives of Wessanen. In setting remuneration levels for the Executive Board, the SARC takes into account the relevant statutory requirements, corporate governance guidelines and best practice in the Netherlands. A)$2,2*/1$B$6,./4$4,,6$-,,6$ '5,@@./4$&1$W,,,6)M,,,6'$XYQZ;<

56 54 Remuneration report Remuneration expenses Executive Board 2010 (in EUR) Base salary Realised Short Term Incentive Restricted share rights Pension costs Other compensation Contract termination P.H. Merckens 375, , ,347 72,012 55,438 F.H.J. Koffrie 208,333 n/a n/a n/a 4,768 F.E. Eelkman Rooda 365, ,631 94, ,431 34, ,400 Terms of employment The employment contracts of Executive Board members appointed before 1 January 2010 are for a 4-year period. Newly appointed Executive Board members will be offered an employment contract for an indefinite period of time. The employment contract ends on the date of retirement or by notice of either party. Terms of appointment Executive Board members are appointed for a period of four years and are subject to reappointment by the shareholders after that period. Notice period Termination of employment by an Executive Board member is subject to three months notice. A notice period of six months will be applicable in the case of termination by the Company. Remuneration components The remuneration for Executive Board members comprises the following components: Base salary, which is fixed and will be reviewed once a year; Short Term Incentive, ranging from 0%-100% of base salary and depending on the achievement of performance targets; Long Term Incentive, ranging from 0%-50% of base salary at grant date and depending on the achievement of performance hurdles; Pension. The base salary and the related pension arrangements are fixed; all other components are (directly or indirectly) linked to performance. Information on the individual remuneration of Executive Board members is shown in the tables above. Details of the 2010 remuneration may be found in Notes 8 and 9 of the Financial Statements, which notes form part of and are incorporated in this Remuneration Report. Remuneration expenses The table above gives an overview of costs incurred by the Company in the financial year in relation to the remuneration of the Executive Board. Costs related to restricted share rights grants are taken by the Company over a number of years. As a consequence, the costs mentioned in the column Restricted share rights are the aggregate accounting costs of multi-year grants to each Executive Board member during their Board membership. Base salary On joining the Executive Board, members receive a base salary that is comparable with the median of the labour-market peer group. Adjustment of the base salary is at the discretion of the Supervisory Board, which takes into account external and internal developments. The annual review date for the base salary is 1 April. Base salary Executive Board 2010 (in EUR) Annual base salary P.H. Merckens 500,000 F.H.J. Koffrie 500,000 F.E. Eelkman Rooda 365,400 Variable compensation Variable compensation an important part of Executive Board members remuneration package is linked to measurable pre-determined targets. Incentive targets and performance conditions reflect the key drivers for value creation and medium to long-term growth in shareholder value. Therefore, a considerable part of the total compensation consists of variable compensation depending on performance. Ultimate remedy The Supervisory Board has the ultimate remedy power in matters relating to adjustment of the value of the variable remuneration components awarded, either downwards or upwards, if this remuneration produces an unfair result. Short Term Incentive Plan Members of the Executive Board are eligible to participate in the cash incentive program called the Wessanen Short Term Incentive Plan (STIP), which provides an annual variable cash incentive, based on the achievement of specific performance targets. These targets are set at a challenging level, taking into account general trends in the relevant markets, and are linked to the financial results of the Company. The targets are determined annually at the beginning of the year by the SARC on behalf of the Supervisory Board. For on-target performance, members of the Executive Board can earn an incentive amounting to 50% of their annual base salary. A maximum pay-out relative to performance will not exceed 100% of the base salary.

57 55 Performance targets 2010 Executive Board Position Short Term Incentive Performance targets and relative weighting P.H. Merckens At target: 50% of base salary Royal Wessanen nv Maximum: 100% of base salary EBIT (40%) Sales growth (20%) Net working capital (40%) F.E. Eelkman Rooda At target: 40% of base salary Royal Wessanen nv Maximum: 80% of base salary EBIT (40%) Sales growth (20%) Net working capital (40%) F.H.J. Koffrie n/a n/a Based on the 2010 results as published in this Annual Report, the realised Short Term Incentive amounts mentioned in the table below will be paid to members of the Executive Board in April Pay-out in 2011 (in EUR) Realised annual incentive As a % of base salary (2010) P.H. Merckens (guaranteed) 250,000 67% F.H.J. Koffrie n/a n/a F.E. Eelkman Rooda 139,631 38% The incentive pay-out in any year relates to achievements in the preceding financial year versus agreed targets. The performance targets are related to operational performance, as measured by operating result (EBIT), reflecting short-term financial results, in addition to annual sales growth and net working capital. The annual incentive pay-out in any year relates to the achievements of the preceding financial year in relation to agreed targets. As a result, the Short Term Incentive paid in 2011 relates to the salary levels and the performance in The Company considers that the combination of EBIT, annual sales growth and working capital adequately reflects the key elements of the Company s financial performance. Targets will be determined each year by the Supervisory Board, based on, among other things, historical performance, the operational and strategic outlook of the company in the short term and stakeholder/management expectations. Mr Merckens was guaranteed an incentive pay-out of EUR 250,000 for the year 2010, representing 50% of annual base salary (respectively 67% of pro rata base salary). The incentive pay-out to Mr Eelkman Rooda amounts to EUR 139,631, representing 38% of annual bas salary, mainly realised by achievement of working capital targets. For 2011 EBIT, sales growth and working capital will apply as performance targets, next to personal targets. Long Term Incentive Plan The Long Term Incentive Plan (LTIP) motivates Executive Board members and eligible employees to focus on long-term sustainable value for shareholders. This plan aligns the interests of participating employees with the shareholders interests and aims to attract, motivate and retain participating employees. Under the LTIP, Executive Board members are rewarded with performance shares. The performance share plan has a three-year horizon with a review date at the end of the third year. At the review date, one specific performance target is measured. The number of shares that vest after three years is determined on the basis of Wessanen s performance against a previously set hurdle. The actual number of performance shares granted to Executive Board members is determined by the Supervisory Board. The target value at grant date is set at a maximum of 50% of the base salary. The awarded performance shares must be retained by Executive Board members for a period of at least five years (including the three-year vesting period, or at least until termination of employment if this period is shorter). During the three-year vesting period, the costs of these shares (determined according to IFRS) will be recognised in the profit and loss statement as personnel costs. Governance The Company will not disclose the actual targets, as they qualify as commercially sensitive information.

58 56 Remuneration report Restricted shares granted in 2010 Granted shares Vesting date P.H. Merckens 80,650 June 2013 P.H. Merckens 53,750 1 April 2011 P.H. Merckens 53,750 1 April 2012 P.H. Merckens 53,750 1 April 2013 F.H.J. Koffrie n/a n/a F.E. Eelkman Rooda 38,900 June Unconditional with the only restriction that Mr Merckens should be in service at vesting date. Relative Total Shareholder Return (TSR) as performance measure Performance shares granted under the LTIP have a three-year horizon with a review date at the end of this period. At the review date the performance of Wessanen is measured on the basis of its total shareholder return (TSR) of the Company in relation to the TSR of peer group companies. TSR measures the returns received by shareholders over the three-year measuring period, and mainly comprises the aggregate of share price appreciation or depreciation and dividends. The measure reflects performance relative to a relevant group of companies (the peer group). If after three years Wessanen has performed well compared to these companies, the Supervisory Board believes management should be rewarded. The actual reward at the end of the three year period is determined by the vesting schedule. As a result, performance under the median is no longer rewarded. The new vesting schedule, applicable as of 2010 is set out in the right hand column of the schedule below. The LTIPs of 2008 and 2009 include a second performance hurdle to the effect that awarded shares will only vest if the overall development of the Wessanen share price has been positive over the three-year testing period. In accordance with the proposal of the Supervisory Board, the Annual Shareholder meeting in April 2010 approved that this second hurdle will be cancelled for the LTIP 2010 and beyond. The rationale for this amendment is that this second hurdle was counter-productive. In a situation where the whole market is down, and the overall share price performance development of Wessanen as well as all or most of its peers is negative at the end of the testing period, this would result in no granted shares vesting even if Wessanen has performed well vis-à-vis its peers (and has scored a ranking of for example 2nd in the TSR vesting schedule). In such a situation management should be rewarded and the performance shares should vest in accordance with the TSR vesting schedule. TSR vesting schedule % vesting of granted shares LTIPs from and Ranking LTIPs up to 2010 including st nd rd th th th th th th th th n/a 0 In 2010 the peer group was changed in order to better reflect the transition of Wessanen to a focused organic food company. The peer group consists of: Bonduelle, Bongrain, CSM, Ebro Puleva, Fleury Michon, Lotus Bakeries, Northern Foods, Nutreco, Premier Foods, Sligro and Wessanen. This peer group is not the same as the one used for determining remuneration levels. The latter is chosen to reflect the relevant labour market. The peer group used for benchmarking TSR performance reflects the relevant market in which the company competes for shareholder preference. It includes sector-specific competitors which the Supervisory Board and the Executive Board consider to be suitable benchmarks for Wessanen. The peer group is reviewed by the Supervisory Board each year. Pensions The pension policy for Executive Board members is predicated on a retirement age of 65. The pension plan is based on a combination of defined benefit (career average) and defined contribution plan. The plan does not require employee contribution. Other compensation A number of additional arrangements apply to Executive Board members, in line with market practice in the Netherlands, and similar to those of other Wessanen executives. These arrangements are: contribution to health & medical insurance premium; the use of company cars; contribution to telephone costs; fixed expense allowances for business purposes.

59 57 Contract termination The employment contracts of Executive Board members include an exit-arrangement provision which is in accordance with best practice provision II.2.8 of the Dutch corporate governance code (i.e. a sum equivalent to the fixed annual salary) except in Change of Control situations (see below) or if this is manifestly unreasonable in the case of dismissal during the first term of office. Agreed termination payments in the contracts of Executive Board members are not to exceed 100% of the base salary. The outstanding Performance Shares shall be deemed to be unconditionally and fully vested and exercisable immediately prior to the Change of Control, or the company shall pay out the fair market value of the outstanding Performance Shares as per the date of the Change of Control. Remuneration policy for the Supervisory Board The remuneration package of the Supervisory Board comprises an annual fixed fee and an annual committeemembership fee. The severance payment that will be made to Mr Eelkman Rooda in 2011 in view of his resignation from the Executive Board does not exceed this threshold. In June 2010 Wessanen reached a final settlement with Mr Veenhof, the Company s former CEO, regarding the latter s severance package. Based on the settlement, an additional severance payment of EUR 435,750 was made and half of the conditional shares granted to him in 2007 and 2008 were delivered. In addition, Mr Veenhof retained the unconditional shares already granted to him. Loans As a matter of policy, the Company does not grant any loans to Executive Board members. Senior management For senior management Wessanen adopts a similar approach as for Executive Board members. This helps to stimulate a performance-driven culture, reflecting the company s ambition and its position in the international market. The SARC is informed on all major remuneration issues for senior management of the Company, and pre-approves the allocation of the total number of Restricted Shares for the Executive Board and Performance Incentive Rights for Senior Management. Members of the Supervisory Board each receive a fixed fee of EUR 45 thousand, excluding expenses. The Chairman of the Supervisory Board is awarded an additional fee of EUR 20 thousand, the Chairman of the Audit Committee is awarded an additional fee of EUR 10 thousand and the Chairman of the SARC is awarded an additional fee of EUR 5 thousand. In accordance with good corporate governance, the remuneration of the Supervisory Board is not dependent on the results of the company. This implies that no bonus, stock options or shares are granted to Supervisory Board members. Any shareholdings in Wessanen held by Supervisory Board members serve as a long-term investment in the company. At year end 2010 no shares in Royal Wessanen nv were held by any member of the Supervisory Board. Wessanen does not provide any loans to Supervisory Board members. Governance Change of Control If the Company discontinues the employment of an Executive Board member following a takeover, merger or any other event in which there is a Change of Control of Royal Wessanen nv, members of the Executive Board are, at the sole discretion of the Supervisory Board, entitled to the following: A severance payment equal to a single multiple of the gross annual base salary on the date of termination. The annual short term incentive award (in cash) will be paid out in full for the year in which the Change of Control occurs on the fixed assumption of at least an on-target performance

60

61 Financial statements 59 Consolidated financial statements Consolidated income statement 60 Consolidated statement of comprehensive income 60 Consolidated statement of financial position 61 Consolidated statement of changes in equity 62 Consolidated statement of cash flows 63 Notes to the consolidated financial statements 64 Company financial statements Income statement of the Company 102 Balance sheet of the Company 103 Notes to the financial statements of the Company 104 Other information 106 Independent auditor s report 107 Financial statements

62 60 Consolidated income statement In EUR millions, unless stated otherwise Notes Continuing operations Revenue Other income Raw materials and supplies (449.7) (429.8) Personnel expenses 8,9 (118.2) (115.8) Depreciation, amortisation and impairments 14,15 (22.9) (58.6) Other operating expenses (116.1) (143.5) Operating expenses (706.9) (747.7) Operating result 5.3 (44.4) Interest income Interest expense (3.2) (8.4) Other financial income and expense (5.1) (11.5) Net financing costs 10 (8.3) (19.9) Share in results of associates Profit/(loss) before income tax (3.0) (64.3) Income tax expense 11 (0.2) (69.0) Profit/(loss) after income tax from continuing operations (3.2) (133.3) Discontinued operations Profit/(loss) from discontinued operations, net of income tax 12 (1.8) (88.3) Profit/(loss) for the period (5.0) (221.6) Attributable to: Equity holders of Wessanen (6.1) (219.7) Non-controlling interests 1.1 (1.9) Profit/(loss) for the period (5.0) (221.6) Earnings per share attributable to equity holders of Wessanen (in EUR) 13 Basic (0.08) (3.25) Diluted (0.08) (3.25) Earnings per share from continuing operations (in EUR) 13 Basic (0.06) (1.94) Diluted (0.06) (1.94) Earnings per share from discontinued operations (in EUR) 13 Basic (0.02) (1.31) Diluted (0.02) (1.31) Average number of shares outstanding (in thousands) 13 Basic 73,229 67,609 Diluted 75,356 67,919 Consolidated statement of comprehensive income In EUR millions Notes Profit/(loss) for the period (5.0) (221.6) Other comprehensive income Foreign currency translation differences, net of income tax Effective portion of changes in fair value of cash flow hedges, net of income tax Other comprehensive income/(loss) Total comprehensive income/(loss) 9.1 (201.6) Attributable to: Equity holders of Wessanen 8.0 (199.7) Non-controlling interests 1.1 (1.9) Total comprehensive income/(loss) 9.1 (201.6)

63 Consolidated statement of financial position December December 2009 In EUR millions Notes Assets Property, plant and equipment Intangible assets Investments in associates and other investments Deferred tax assets Total non-current assets Inventories Income tax receivables Trade receivables Other receivables and prepayments Cash and cash equivalents Assets classified as held for sale Total current assets Total assets Equity Share capital Share premium Reserves (25.7) (43.8) Retained earnings Equity attributable to equity holders of Wessanen Non-controlling interests Total equity Liabilities Interest-bearing loans and borrowings Employee benefits Provisions Deferred tax liabilities Total non-current liabilities Bank overdrafts Interest-bearing loans and borrowings Provisions Income tax payables Trade payables Non-trade payables and accrued expenses Liabilities classified as held for sale Total current liabilities Total liabilities Total equity and liabilities Financial statements

64 62 Consolidated statement of changes in equity Issued and paid-up share capital Share premium Reserve for own shares Other reserves Translation reserve Hedging reserve Other legal reserves Retained earnings Total equity attributable to equity holders of Wessanen Noncontrolling interests In EUR millions 2009 Balance at beginning of year as previously reported (6.2) (50.5) (7.7) Adjustments related to previous years 0.3 (14.9) (14.6) (14.6) Balance at beginning of year (restated) (6.2) (50.2) (7.7) Total comprehensive income and expense for the period Profit/(loss) for the period (219.7) (219.7) (1.9) (221.6) Foreign currency translation differences Effective portion of changes in fair value of cash flow hedges Total comprehensive income and expense for the period (219.7) (199.7) (1.9) (201.6) Contributions by and distributions to owners Share options exercised/shares delivered 0.2 (0.2) Share-based payments Transfer to other legal reserves (2.4) 2.4 Total contributions by and distributions to owners 0.2 (2.4) Changes in ownership interest in subsidiaries that do no result in a loss of control Change in non-controlling interests (0.2) (0.2) Balance at year end (6.0) (37.4) (0.5) Balance at beginning of year (6.0) (37.4) (0.5) Total comprehensive income and expense for the period Profit/(loss) for the period (6.1) (6.1) 1.1 (5.0) Foreign currency translation differences Effective portion of changes in fair value of cash flow hedges Total comprehensive income and expense for the period (6.1) Contributions by and distributions to owners Share options exercised/shares delivered 0.5 (0.5) Equity offering Sale of own shares 2.5 (1.7) Share-based payments Transfer to other legal reserves 1.0 (1.0) Total contributions by and distributions to owners (2.8) Balance at year end (3.0) (24.0) Total equity

65 Consolidated statement of cash flows 63 In EUR millions Notes Cash flows from operating activities Operating result 5.3 (44.4) Adjustments for: Depreciation, amortisation and impairments Provisions created Other non-cash and non-operating items Cash generated from operations before changes in working capital and provisions Changes in working capital Payments from provisions (4.4) (1.8) Changes in employee benefits (2.0) (2.2) Cash generated from operations Income tax received/(paid) 6.7 (19.2) Interest paid (4.6) (11.3) Operating cash flow from continuing operations Operating cash flow from discontinued operations (21.7) 52.6 Net cash from operating activities Cash flows from investing activities Acquisition of property, plant and equipment (11.5) (9.5) Proceeds from sale of property, plant and equipment Acquisition of intangible assets, excluding goodwill (2.4) (2.1) Proceeds from sale of intangible assets 0.6 Proceeds from investments Acquisition of subsidiaries and businesses, net of cash acquired 5 (2.6) (1.0) Investing cash flow from continuing operations (14.5) (10.6) Investing cash flow from discontinued operations (0.3) Net cash from/(used in) investing activities (10.9) Cash flows from financing activities Repayments of interest bearing loans and borrowings (177.9) (22.9) Net payments of finance lease liabilities (0.4) (0.4) Cash payments derivatives (8.5) (6.3) Cash payments transaction costs interest bearing loans and borrowings (4.5) Sale of own shares 0.8 Share capital increase 17.9 Financing cash flow from continuing operations (168.1) (34.1) Financing cash flow from discontinued operations (3.5) Net cash from/(used in) financing activities (168.1) (37.6) Net cash flow 30 (35.2) 16.0 Financial statements

66 64 Notes to the consolidated financial statements Notes to the consolidated financial statements are in EUR millions, except for per share data, ratios, percentages and where indicated otherwise. 1. The Company and its operations Royal Wessanen nv ( Wessanen or the Company ) is a public limited company domiciled in the Netherlands. It is a leading company in the European organic food market. Operating mainly in France, the Benelux, the UK, Germany and Italy, we manage and develop our brands and products in the grocery and health food channels. Our vision is to make our organic brands most desired in Europe. Next to our leading position in the organic food businesses, we also produce and market frozen snack products in the Benelux and fruit drinks and cocktail mixers in the United States. The consolidated financial statements of Royal Wessanen nv for the year ended 31 December 2010, comprise Wessanen and its subsidiaries (together referred to as the Group ) and Wessanen s interest in associated companies. Wessanen s significant subsidiaries and associated companies as at 31 December 2010 are listed in Note 31. The address of the Company s registered office is Hoogoorddreef 5, Amsterdam Zuidoost, the Netherlands. 2. Basis of preparation Statement of compliance The consolidated financial statements for the year ended 31 December 2010 have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and also comply with the financial reporting requirements included in Part 9 of Book 2 of the Netherlands Civil Code. The financial statements were signed and authorised for issuance by the Supervisory Board and the Executive Board on 23 February 2011, and will be submitted for adoption to the Annual General Meeting of Shareholders to be held on 19 April Basis of measurement The consolidated financial statements have been prepared under the historical cost convention, unless otherwise indicated, including the following assets and liabilities that are stated at their fair value: derivative financial instruments, financial instruments at fair value through profit or loss, financial assets classified as available for sale, defined benefit plan assets and liabilities for cash-settled share-based payment arrangements. The methods used to measure fair value are disclosed in Note 4. Functional and presentation currency The functional currency of Wessanen is the Euro. These consolidated financial statements are presented in millions of Euro. Use of estimates and judgements The preparation of Wessanen s consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, of revenues and expenses and the disclosure of contingent assets and liabilities. Although these estimates and associated assumptions are based on management s best knowledge of current events and actions, actual results may ultimately differ materially from these estimates and assumptions. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The estimates and assumptions that management considers most critical and that have a significant inherent risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are disclosed hereinafter. Impairment of non-current assets Determining whether non-current assets are to be impaired requires an estimation of the recoverable amount of the asset (or cash-generating unit), which is the greater of fair value less costs to sell and value in use. The value in use calculation requires management to estimate the future cash flows expected to arise from the asset (or cash-generating unit) and an appropriate discount rate, in order to calculate the present value of the expected future economic benefits of an asset (or cash-generating unit). See Note 15 for specific information on the carrying amounts of goodwill and brands, the cash-generating units affected and the estimates and assumptions applied. Pensions The calculation of the defined benefit obligations and, in relation to that, the net periodic benefit costs for the periods presented, requires management to estimate, amongst others, future benefit levels, discount rates, investment returns on plan assets and life expectancy. Due to the long-term nature of these plans such estimates are subject to considerable uncertainties and may require adjustments in future periods, impacting future liabilities and expenses. See Note 23 for specific information on the estimates and assumptions applied in respect of the calculation of the defined benefit obligations. Income taxes Wessanen is subject to income taxes in several jurisdictions. The Group has tax loss carry-forward positions whereby the realisation of deferred tax assets will be largely dependent upon the availability of future taxable income, as estimated from time to time by management and the availability of tax strategies. Significant judgement is required in determining the consolidated provision for income taxes and the recoverable amounts of deferred tax assets related to tax loss carry forward positions. Provisions Restructuring provisions and other provisions are determined by management on the basis of estimated amounts of the future outflow of economic benefits and judgement of the probability that such outflow will take place. Change in accounting policies From 1 January 2010 Wessanen applies the revised IFRS 3 Business Combinations. The revised standard introduced the requirement that all transaction costs incurred in respect of an acquisition by an acquirer (whether directly or indirectly) are charged immediately to the income statement. Previously, transaction costs, other than those associated with the issue of debt or equity securities, were capitalised as part of the cost of the acquisition. The change in accounting policy has been applied prospectively and has had no material impact on earnings per share (costs related to the acquisition of Kroon BV in 2010 in the amount of EUR 0.1 have been expensed). Wessanen also applies the revised IAS 27 Consolidated and Separate Financial Statements in accounting for acquisitions and non-controlling interests as from 1 January The change in accounting policy has been applied prospectively and has had no impact on earnings per share.

67 65 2. Basis of preparation continued Under the new policy, acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Previously, goodwill was recognised on the acquisition of non-controlling interests in a subsidiary, which represented the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of the transaction. Application of IFRS 8 Operating segments as of 1 January 2009 resulted in the decision to change Wessanen s segment structure as from the fourth quarter of 2010 by splitting Wessanen Europe by sales channel into Wessanen Europe Grocery and Wessanen Europe Health Food Stores (HFS). The change in segment structure did not have an impact on Wessanen s consolidated financial results or position. Comparative information has been changed accordingly. investment in the associate to the extent of the Group s interest in the associate. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Foreign currency Foreign currency transactions Transactions in foreign currencies (not being the functional currency) are translated to the functional currency using the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to Euro at the exchange rates ruling at the balance sheet date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities denominated in foreign currencies that are stated at historical cost are translated to Euro at foreign exchange rates ruling at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Euro at foreign exchange rates ruling at the dates the fair value was determined. Furthermore, a number of other new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2009 and have been applied in preparing these consolidated financial statements. None of these had a significant effect on the consolidated financial statements. 3. Significant accounting policies The accounting policies set out below have been consistently applied to all periods presented in these consolidated financial statements, and have been applied consistently by all Group entities. Basis of consolidation Subsidiaries The consolidated financial statements incorporate the financial statements of Wessanen and all entities that are controlled by Wessanen ( subsidiaries ). Control is presumed to exist when Wessanen has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities (generally accompanying a shareholding of more than one half of the voting rights). In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Associates Associates are those entities in which Wessanen has significant influence, but not control, over the financial and operating policies (generally accompanying a shareholding of between 20% and 50% of the voting rights). The consolidated financial statements include the Group s share of the total recognised gains and losses of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases. When the Group s share of losses of the associate exceeds the carrying amount of the associate, the carrying amount is reduced to nil and recognition of further losses is discontinued, except to the extent that Wessanen has incurred obligations or made payments on behalf of the associate. Financial statements of foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisitions, are translated to Euro at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to Euro at annual average exchange rates. The resulting foreign exchange differences arising on translation are recognised directly in a separate component of equity, the translation reserve. Net investment in foreign operations Foreign exchange differences arising from the translation of the net investment in foreign operations, and of related hedges, are taken to the translation reserve. Such differences are recognised in the income statement upon disposal of the foreign operation or settlement of the net investment. The principal exchange rates against the Euro used in the balance sheet and income statement are: 31 December 2010 Balance sheet Income statement 31 December Currency per EUR USD CAD GBP Derivative financial instruments Wessanen uses derivative financial instruments to hedge its exposure to foreign exchange, interest rate and commodity risks arising from operating, investing and financing activities. These instruments are initially recognised in the balance sheet at fair value on a settlement date basis and are subsequently remeasured at their fair value. Gains and losses resulting from the fair value re-measurement are recognised directly in the income statement, unless the derivative qualifies and is effective as a hedging instrument in a designated hedging relationship. Derivatives that are designated as hedges are accounted for as either cash flow hedges or fair value hedges. Financial statements Transactions eliminated on consolidation Intra-group balances and transactions and any unrealised gains and losses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted associates are eliminated against the Gains and losses on derivative financial instruments are (ultimately) recognised in the income statement under financial income and expenses, except for the effective portion of those derivative financial instruments that are designated as hedges and entered into to mitigate operational risks. This portion is recognised in operating result.

68 66 Notes to the consolidated financial statements 3. Significant accounting policies continued Hedging Cash flow hedges If a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised liability, a firm commitment or a highly probable forecasted transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in other comprehensive income. When the firm commitment or forecasted transaction results in the recognition of an asset or liability, the cumulative gain or loss is removed from other comprehensive income and included in the initial measurement of the asset or liability. Otherwise, the cumulative gain or loss is removed from other comprehensive income and recognised in the income statement at the same time as the hedged transaction. The ineffective part of any gain or loss is immediately recognised in the income statement. When a hedging instrument or hedge relationship is terminated, but the hedged transaction still is expected to occur, the cumulative gain or loss at that point remains in other comprehensive income and is recognised in the income statement in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in other comprehensive income is recognised immediately in the income statement. Fair value hedges Fair value changes of derivative instruments that qualify for fair value hedge accounting treatment are recognised for the hedged risk in the income statement in the periods in which they arise, together with any changes in fair value of the hedged asset or liability. Hedge of monetary assets and liabilities If a derivative financial instrument is used to economically hedge the foreign exchange exposure of a recognised monetary asset or liability, the gain or loss on the hedging instrument is recognised in the income statement, except for those financial instruments that are designated as hedges. Hedge of net investment in a foreign operation The portion of the gain or loss on an instrument used to hedge a net investment in foreign operation that is determined to be an effective hedge is recognised directly in other comprehensive income. The ineffective portion is recognised in the income statement. Segment reporting An operating segment is a component of Wessanen that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company s other components. The operating segment s operating result (EBIT) is reviewed regularly by the Executive Board of Wessanen to make decisions about resources to be allocated to the segment and assess the performance, and for which discrete financial information is available. Segment results that are reported to the Executive Board of Wessanen include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise part of the overhead expenses (corporate costs), financial income and expenses and income tax gains and losses. Corporate assets and liabilities and income tax assets and liabilities are excluded from segment assets and liabilities. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill. Inter-segment sales are executed under normal commercial terms and conditions that would be available to unrelated third parties. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition or construction of the asset and may include borrowing costs incurred during construction. Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately, including major inspection and overhaul expenditure, is capitalised. Other subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the item of property, plant and equipment. All other expenditure is recognised in the income statement as an expense as incurred. Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives. Land is not depreciated. Where an item of property, plant or equipment comprises major components having different useful lives, they are accounted for as separate items of property, plant and equipment. Depreciation methods, useful lives, as well as residual values are tested annually. Assets not in use are recorded at the lower of their book value and recoverable amount. The estimated useful lives of property, plant and equipment for the current and comparative period are as follows: Buildings and offices Machinery and equipment Computers Other 30 years years 3-5 years 3-5 years Assets not in use and assets classified as held for sale are not depreciated. Finance lease Leases under which Wessanen assumes substantially all the risks and rewards of ownership are classified as finance leases. Plant and equipment acquired by way of finance lease is stated at an amount equal to the lower of its fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses. Leased assets are depreciated over the shorter of the lease term and their useful lives. Lease payments are accounted for as described in the accounting policy on Expenses. Government grants Government grants received in respect of property, plant and equipment are deducted from the carrying values of the related assets. The grants are thus recognised as income over the life of the assets by way of reduced depreciation charges. Intangible assets Goodwill All business combinations are accounted for by applying the acquisition method as at the acquisition date. Goodwill represents amounts arising on acquisition of subsidiaries, associates and joint ventures.

69 67 3. Significant accounting policies continued In respect of acquisitions that have occurred since 1 January 2010, goodwill represents the excess of the cost of the acquisition over the Group s interest in the net fair value of the identifiable assets and liabilities and contingent liabilities at the date of acquisition (measured based on methods as described in Note 4). Negative goodwill arising on an acquisition is recognised directly in the income statement, classified as other income. Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that Wessanen incurs in connection with a business combination are expensed as incurred. In respect of acquisitions that have occurred between 1 January 2004 and 1 January 2010, goodwill represents the excess of the cost of the acquisition over the Group s interest in the net fair value of the identifiable assets and liabilities and contingent liabilities at the date of acquisition. When the excess was negative, a bargain purchase gain was recognised directly in the income statement, classified as other income. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurred in connection with business combinations were capitalised as part of the cost of the acquisition. In respect of acquisitions prior to 1 January 2004, goodwill is included on the basis of its deemed cost, which represents the amount recorded under previous Dutch GAAP. In respect of acquisitions prior to 1 January 2001, goodwill was deducted directly from equity under previous Dutch GAAP. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is no longer amortised but tested annually for impairment. In respect of associates, the carrying amount of goodwill is included in the carrying amount of the investment in the associate. Brands and customer relationships Capitalised brands and customer relationships are measured at cost less accumulated amortisation and impairment losses. Brands and customer relationships acquired in business acquisitions are initially measured at fair value. The useful lives of brand names have been determined on the basis of certain factors such as the economic environment, the expected use of the asset and related assets or groups of assets and legal or other provisions that might limit the useful life. Based on this assessment, the useful life is determined to be indefinite, since there is no foreseeable limit to the period of time over which the brand names are expected to contribute to the cash flows of the Group. Capitalised brands with an indefinite life are not amortised, but tested annually for impairment. Customer relationships are amortised over their estimated useful lives of maximum 20 years. Research and development Expenditure on research activities, undertaken with the prospect of gaining new scientific or technological knowledge and understanding, is recognised in the income statement as an expense when incurred. and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labor and overhead costs that are directly attributable to preparing the assets for its intended use. Other development expenditure is recognised in the income statement as an expense when incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and accumulated impairment losses. Other intangible assets Other intangible assets that are acquired by Wessanen, which have finite useful lives, are stated at cost less accumulated amortisation and impairment losses. Subsequent expenditure Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred. Amortisation Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets are amortised from the date they are available for use. Residual useful life is re-assessed annually. Investments in associates The results, assets and liabilities of associates are accounted for by the equity method. The consolidated financial statements include the Group s share of the total recognised gains and losses of associates from the date that significant influence commences until the date that significant influence ceases. When the Group s share of losses of the associate exceeds the carrying amount of the associate, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that Wessanen has incurred obligations or made payments on behalf of the associate. Transactions between the Group and associates are at an arm s length basis. Investments in equity and debt securities Financial instruments held for trading are classified as current assets and are stated at fair value, with any resultant gain or loss recognised in the income statement. Held-to-maturity assets are stated at amortised cost less impairment losses. Other investments held by Wessanen are classified as being available for sale and are stated at fair value, with any resultant gain or loss recognised directly in other comprehensive income, except for impairment losses and, in the case of monetary items, foreign exchange rate gains and losses. When these investments are derecognised, the cumulative gain or loss previously recognised directly in equity is recognised in the income statement. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in the income statement. Dividends received are recognised upon declaration. Financial statements Expenditure on development activities, of which research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development Inventories Inventories are stated at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-out principle, and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an

70 68 Notes to the consolidated financial statements 3. Significant accounting policies continued appropriate share of production overheads based on normal operating capacity. Inventory is valued net of vendor allowances if applicable. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Trade and other receivables Trade and other receivables are stated at their amortised cost less impairment losses. Amortised cost is determined using the effective interest rate. Cash and cash equivalents Cash and cash equivalents comprise cash and bank balances and call deposits. Cash equivalents are only recognised when control over the possibility to convert to cash is transferred to or from Wessanen. Bank overdrafts that are repayable on demand and form an integral part of Wessanen s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Bank accounts are netted if the Company has a legal enforceable right to offset and offsetting takes place on a regular basis. Impairment of assets The carrying amounts of Wessanen s assets, other than inventories and deferred tax assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset s recoverable amount is estimated. For intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in the income statement. Goodwill, brands and other intangible assets with indefinite useful lives are subject to annual impairment testing, irrespective of whether indications of impairment exist or not. Calculation of recoverable amount The recoverable amount of Wessanen s investments in held-to-maturity securities and receivables is calculated as the present value of expected future cash flows, discounted at the original effective interest rate inherent in the asset. Receivables with a short duration are not discounted. The recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Reversal of impairment An impairment loss in respect of a held-to-maturity security or receivable carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed when there is an indication that the impairment may no longer exist and when there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Non-current assets held for sale and discontinued operations Non-current assets and disposal groups (a group of assets to be disposed of in a single transaction and liabilities directly associated with those assets) are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for sale in its immediate condition. Management must be committed to the sale, which should be expected within one year from the date of classification as held for sale. Immediately before classification as held for sale, the assets (or components of a disposal group) are remeasured in accordance with the Group s accounting policies. Thereafter, the assets (or disposal group) are recognised at the lower of their carrying amount and fair value less cost to sell. Assets classified as held for sale, or included within a disposal group that is classified as held for sale, are not depreciated. Impairment losses on initial classification as held for sale and subsequent gains or losses on re-measurement are included in the income statement. Gains are not recognised in excess of any cumulative impairment loss. A discontinued operation is a component of Wessanen s business that represents a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. A disposal group that is to be abandoned may also qualify. Results from operations qualifying as discontinued operations are presented separately as a single amount on the income statement. Results from operations qualifying as discontinued operations as of the balance sheet date for the latest period presented, that have previously been presented as results from continuing operations, are represented as results from discontinued operations for all periods presented. In case conditions for classification of non-current assets and disposal groups as held for sale are no longer met, classification as held for sale ceases. Accordingly, results of operations, previously presented in discontinued operations, are reclassified and included in result from continuing operations for all periods presented. Non-current assets that ceases to be classified as held for sale are remeasured at the lower of their carrying amount before classification as held for sale, adjusted for any depreciation, amortisation or revaluations that would have been recognised had the asset or disposal group not been classified as held for sale, and its recoverable amount at the date of the subsequent decision to sell.

71 69 3. Significant accounting policies continued Equity Issued and paid-up capital Wessanen s issued capital comprises of EUR 1.00 par value common shares and is stated at nominal value. Repurchase of shares When shares are repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a change in equity. Repurchased shares are classified as treasury shares and presented as a deduction from total equity. Considerations received when own shares are reissued are presented as a change in equity. Any results arising on the reissuance of shares are recognised in retained earnings. Dividends Dividends are recognised as a liability in the period in which they are declared. Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis. Employee benefits Defined contribution plans Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as incurred. Defined benefit plans Wessanen s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine the present value, and any unrecognised past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at balance sheet date on high-quality corporate bonds that have maturity dates approximating the terms of Wessanen s obligations. The calculation is performed by a qualified actuary using the projected unit credit method. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the income statement on a straight-line basis over the average period until the benefits will vest. To the extent that the benefits vest immediately, the expense is recognised immediately in the income statement. Actuarial gains and losses that arise are recognised in the income statement over the expected average remaining working lives of the employees participating in the plan, to the extent that any cumulative unrecognised actuarial gain or loss exceeds 10% of the greater of the present value of the defined benefit obligation and the fair value of plan assets. Otherwise, the actuarial gain or loss is not recognised. Where the calculation results in a benefit to Wessanen, the recognised asset is limited to the net total of any unrecognised actuarial losses and past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan. Long-term service benefits Wessanen s net obligation in respect of long-term service benefits, other than pension plans, is the amount of the future benefit that employees have earned in return for their service in the current and prior periods. The obligation is calculated using the projected unit credit method and is discounted to its present value while the fair value of any related assets is deducted. The discount rate is the yield at balance sheet date on high-quality corporate bonds that have maturity dates approximating the terms of Wessanen s obligations. Share-based payment transactions The stock option program (discontinued as of 2005) allowed Wessanen employees to acquire shares of Wessanen. The restricted shares program grants conditional rights to receive shares to eligible employees of Wessanen. For equity-settled share-based payment transactions, the grant date fair value of share-based compensation plans is expensed, with a corresponding increase in equity, on a straight-line basis over the vesting periods of the grants. The cumulative expense recognised at each balance sheet date reflects the extent to which the vesting period has expired and the Company s best estimate of the number of shares that will eventually vest. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition (e.g. total shareholder return), which are treated as vested irrespective of whether or not the market condition is satisfied, provided that all non-market conditions (e.g. continued employment) are satisfied. For cash-settled share-based payment transactions, the grant date fair value is recognised in the income statement over the vesting periods of the grants, with a corresponding increase in provisions. At each balance sheet date, and ultimately at settlement date, the fair value of the liability is re-measured with any changes in fair value recognised in the income statement. Provisions A provision is recognised in the balance sheet if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. A restructuring provision is recognised when certain criteria are met. Such criteria include the existence of a detailed formal plan that identifies at least the business or part of the business concerned, the principal location(s) affected, the approximate number of employees whose employment contracts will be terminated, the estimated costs and the timing of when the plan will be implemented. Furthermore, the Company must have raised a valid expectation with those affected that it will carry out the restructuring, by starting to implement that plan or announcing its main features to those affected by it. Future operating costs are not provided for. Financial statements

72 70 Notes to the consolidated financial statements 3. Significant accounting policies continued Trade and other payables Trade and other payables are stated at amortised cost. Amortised cost is determined using the effective interest rate. Revenue Revenue represents the value of goods delivered to third parties, less any value-added taxes or other sales taxes. Revenue is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. Customer deductions, coupons, rebates, and sales returns and discounts are recorded as reductions to sales and are included in revenue in the consolidated income statement. Fair value of the consideration received or receivable is allocated between (1) the goods and/or services purchased and delivered and (2) the award credits that will be redeemed in the future, if applicable. The consideration allocated to the award credits is presented as deferred revenue in the balance sheet. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods. Revenue related to government grants is recognised in the balance sheet initially as deferred income when there is reasonable assurance that it will be received and that Wessanen will comply with the conditions associated with the grant. Grants that compensate Wessanen for expenses incurred are recognised in the income statement on a systematic basis in the same periods in which the expenses are recognised. Grants that compensate Wessanen for the cost of an asset are recognised in the income statement on a systematic basis over the useful life of the asset. Expenses Operating lease payments Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Finance lease payments Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Net financing costs Net financing costs comprise interest payable on borrowings calculated using the effective interest rate method, interest receivable on funds invested, losses on unwinding the discount on provisions, foreign exchange gains and losses, and gains and losses on hedging instruments that are recognised in the income statement. Interest income is recognised in the income statement as it accrues, using the effective interest method. The interest expense component of finance lease payments is recognised in the income statement using the effective interest rate method. Income tax Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustments to current tax payable in respect of previous years. Deferred tax is recognised using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets and liabilities are not recognised for temporary differences arising from the initial recognition of goodwill, the initial recognition of other assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. Deferred tax is measured at tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted at the balance sheet date. Deferred tax assets, including deferred tax assets for tax loss carry forwards, are recognised to the extent that the company has sufficient taxable temporary differences or it is probable that future taxable profits will be available against which deductible temporary differences can be utilised and deferred tax assets realised. The recoverable amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are not discounted. Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised. Deferred tax assets and liabilities are offset in the balance sheet when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes are levied by the same fiscal authority. Cash flows statement Cash flows from operating activities Cash flows from operating activities are calculated by the indirect method, by adjusting the consolidated operating result of Wessanen for expenses that are not cash flows (such as amortisation, depreciation and impairments), and for autonomous movements in consolidated working capital (respectively excluding the impact from acquisitions, divestments and foreign currency differences). Cash payments to employees and suppliers are all recognised as cash flows from operating activities. Operating cash flows also include the costs of financing of operating activities, income taxes paid on all activities, and spending on restructuring and other provisions. Cash flows from investing activities Cash flows from investing activities are those arising from net capital expenditure and from the acquisition and sale of subsidiaries and businesses. Cash and cash equivalents available at the time of acquisition or sale are deducted from the related payments or proceeds.

73 71 3. Significant accounting policies continued Cash flows from financing activities Cash flows from financing activities comprise the cash receipts and payments from issued and repurchased shares, dividend, debt instruments and derivatives. Cash flows from short-term financing are also included. Cash receipts and payments from derivative financial instruments are classified in the same manner as the cash flows of the hedged items. Cash flows in foreign currencies are translated into Euro at foreign exchange rates ruling at the date of transaction. New standards and interpretations not yet effective A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2010, and have not been applied in preparing these consolidated financial statements. None of these is expected to have a significant effect on the consolidated financial statements of Wessanen, except for IFRS 9 Financial Instruments, which becomes mandatory for the Wessanen 2013 consolidated financial statements and could change the classification and measurement of financial assets. Wessanen does not plan to adopt this standard early and the extent of the impact has not been determined. 4. Determination of fair value A number of the Group s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. Property, plant and equipment The fair value of property, plant and equipment recognised as a result of a business combination is based on market values. The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The market value of items of plant, equipment, fixtures and fittings is based on the quoted market prices for similar items. Intangible assets The fair value of brands acquired in a business combination is based on the discounted estimated royalty payments that have been avoided as a result of the brand being owned. The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets. Investments in equity and debt securities The fair value of financial assets at fair value through profit or loss, held-to-maturity investments and available-for-sale financial assets is determined by reference to their quoted bid price or another reliable fair value estimate at the balance sheet date. The fair value of held-tomaturity investments is determined for disclosure purposes only. If not quoted, and another reliable fair value estimation is not available, those investments are stated at (deemed) cost. Trade and other receivables The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. Derivatives The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds). The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date. Non-derivative financial liabilities Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases the market rate of interest is determined by reference to similar lease agreements. Share-based payment transactions The fair value of stock options and restricted shares granted is recognised as personnel expense over the vesting period of the stock options and the restricted shares with a corresponding increase in equity for equity-settled plans respectively provisions for cash-settled plans. For equity-settled plans, the fair value of stock options and restricted shares is measured at grant date and spread over the period during which the employees become unconditionally entitled to the stock options and the restricted shares. For cash-settled plans the fair value of restricted shares is re-measured at each balance sheet date. The fair value of stock options and restricted shares granted is measured using a Monte Carlo simulation model, taking into account the terms and conditions upon which the instruments were granted. Financial statements Inventories The fair value of inventories acquired in a business combination is determined based on its estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.

74 72 Notes to the consolidated financial statements 5. Acquisitions In 2010 Wessanen made the following acquisitions: Wessanen Europe HFS In April 2010, Royal Wessanen acquired 100% of the shares of Kroon BV for a cash amount of EUR 2.6, net of cash acquired (EUR 0.1). Kroon is the number two supplier of fresh produce in the HFS channel in the Netherlands. The results of Kroon are consolidated as from 1 April 2010, contributing EUR 7.6 to consolidated revenue and EUR 0.1 to consolidated operating profit for the period. The acquisition had an effect on the Group s assets and liabilities of EUR 1.5 respectively EUR 1.4. The acquisition resulted in additional goodwill recognition of EUR 2.6. The goodwill is mainly attributable to the expected synergies to be achieved from integrating the businesses into the Group s existing Wessanen Europe HFS business. In 2009 Wessanen made the following acquisitions: Wessanen Europe Grocery In February 2009, Wessanen acquired the remaining 0.4% of Distriborg Groupe s shares for EUR 1.0 in cash, including acquisition costs. From then on Wessanen held 100% of the shares of Distriborg Groupe. As a result, Distriborg Groupe s shares were delisted from Euronext Paris. As Distriborg Groupe was already fully consolidated, the increase in the shareholding did not have any effect on consolidated revenue and operating profit for the period. Goodwill was capitalised in the amount of EUR 0.5, and non-controlling interests reduced by EUR 0.5. Frozen Foods In April 2009, Wessanen made a capital contribution of EUR 4.0 to Favory Convenience Food Group, resulting in an increased equity interest in Favory Convenience Food Group from 60.6% to 64.1%. The capital contribution was required and used by Favory Convenience Food Group for repayment of EUR 4.0 of the financing drawn under its major credit facility, as a result of which continuation of funding was secured. As Favory Convenience Food Group was already fully consolidated, the increase in the shareholding did not have any effect on consolidated revenue and operating profit for the period. Goodwill was capitalised in the amount of EUR 0.3 and non-controlling interests increased by EUR 0.3. Discontinued operations On 1 March 2009, Tree of Life, Inc. a 100% subsidiary of Wessanen, acquired seven retail locations of Warehouse Vitamins Inc., a retailer of vitamins, dietary supplements, sports nutrition, nutritional and other health related products in the Tucson, Arizona area, against settlement of a long-term loan receivable of EUR 1.2. Acquisition costs amounted to EUR 0.1. Later in the year, Tree of Life was classified as held for sale (see Note 12). Warehouse Vitamins was sold together with Tree of Life.

75 73 6. Segment information In the fourth quarter of 2010, Wessanen split the Wessanen Europe segment into Wessanen Europe Grocery and Wessanen Europe Health Food Stores (HFS), in light of the strategic update. The comparative financial data have been represented accordingly. The accounting policies used for the segments are the same as the accounting policies applied in the consolidated financial statements as described in Note 3. Segment Wessanen Europe Grocery Wessanen Europe HFS Frozen Foods American Beverage Corporation Non-allocated Discontinued operations Significant operating companies Distriborg France, Foodprints, Kallo, CoSa, Distriborg Italy, Bio Slym Laboratoire Kalisterra, Bio-Distrifrais-Chantenat, R. Bonneterre, Natudis Nederland, Kroon, Tree of Life UK, Tartex, Allos Beckers, Favory Convenience Food Group American Beverage Corporation Corporate entities Tree of Life, Inc., Liberty Richter, PANOS Brands, Karl Kemper and Righi Wessanen Europe Grocery Wessanen Europe HFS Frozen Foods American Beverage Corporation Nonallocated 3 Eliminations Total Discontinued operations Total Wessanen 2009 Income statement information Total revenue third parties ,585.4 Inter-segment revenue (9.6) Total segment revenue (9.6) ,585.4 Operating result (EBIT) (7.2) (30.4) (14.0) (44.4) 2.9 (41.5) Net financing costs (19.9) (0.7) (20.6) Share in results of associates Profit/(loss) before income tax (64.3) 2.2 (62.1) Statement of financial position Assets Assets related to operations Deferred and current income tax Assets related to continuing operations Assets held for sale Total Assets Liabilities Liabilities related to operations Derivative financial instruments Deferred and current income tax Liabilities related to continuing operations Liabilities held for sale Total Liabilities Other information Investments in PP&E and IA¹ Depreciation, amortisation Impairments Total other non-cash items² Average capital employed Average number of employees ,261 3,343 5,604 1 Investments in property, plant and equipment ( PP&E ), including financial leases and intangible assets ( IA ). 2 Total of provisions created, gain from disposals, and other non-cash and non-operating items as reflected in the consolidated statement of cash flows. 3 Non-allocated consists of corporate entities. Financial statements

76 74 Notes to the consolidated financial statements 6. Segment information continued Wessanen Europe Grocery Wessanen Europe HFS Frozen Foods American Beverage Corporation Nonallocated 3 Eliminations Total Discontinued operations Total Wessanen 2010 Income statement information Total revenue third parties Inter-segment revenue (12.1) Total segment revenue (12.1) Operating result (EBIT) (12.3) Net financing costs (8.3) (8.3) Share in results of associates Profit/(loss) before income tax (3.0) 2.0 (1.0) Statement of financial position Assets related to operations Deferred and current income tax (0.6) 6.7 Assets related to continuing operations Assets held for sale Total Assets Liabilities Liabilities related to operations Derivative financial instruments Deferred and current income tax Liabilities related to continuing operations Liabilities held for sale Total Liabilities Other information Investments in PP&E and IA¹ Depreciation, amortisation Impairments Total other non-cash items² Average capital employed Average number of employees ,276 2,276 1 Investments in property, plant and equipment ( PPE ), including financial leases and intangible assets ( IA ) 2 Total of provisions created, gain from disposals, and other non-cash and non-operating items as reflected in the consolidated statement of cash flows 3 Non-allocated consists of corporate entities. Geographical information Revenue Non-current assets The Netherlands (country of domicile) France United Kingdom Other European countries United States and Canada Other countries Total continuing operations Total discontinued operations Total Group , Property, plant and equipment and intangible assets

77 75 7. Other Income Other income in 2009 of EUR 0.8 includes insurance proceeds received. 8. Personnel expenses and remuneration Executive Board and Supervisory Board Personnel expenses Personnel expenses can be specified as follows: Salaries & wages Social security Defined contribution plans Defined benefit plans Share-based payment expenses Other personnel expenses Total personnel expenses The average number of full-time employees in 2010 for continuing operations amounted to 2,276 (2009: 2,261). In the Netherlands, Wessanen employed on average 656 (2009: 612) full-time employees, including Favory Convenience Food Group (excluding Favory Convience Food Group 493 in 2010 (2009: 459). Executive Board remuneration expenses Mr Merckens was appointed by the Annual General Meeting of Shareholders on 14 April 2010 as member of the Executive Board for a term of four years. He became Chief Executive Officer and Chairman of the Executive Board as per 1 June Mr Koffrie stepped down as interim Chief Executive Officer as per 1 June 2010, and was re-appointed as member of the Supervisory Board as from that same date. Short-term bonuses Share-based Other compensation 1 Pension costs 2 compensation Contract termination In EUR thousands Salary Total 2009 F.H.J. Koffrie F.E. Eelkman Rooda K.R. Lane ,284 2,101 A.H.A. Veenhof ,440 Total 1, ,842 4, P.H. Merckens ,004 F.E. Eelkman Rooda ,103 F.H.J. Koffrie Total ,320 1 The share-based compensation represents the share-based compensation expense calculated under IFRS 2 related to the Executive Board. The fair value of the share-based compensation grants is expensed on a straight-line basis over the vesting period of the grants. 2 The pension premium amount of A.H.A. Veenhof was paid directly together with the salary payment into the personal account. 3 F.H.J. Koffrie was interim CEO from 24 February 2009 until 1 June 2010, and was re-appointed as member of the Supervisory Board as per that same date. 4 K.R. Lane received a total payment related to the divestment of Tree of Life, Inc. of EUR 1,284 thousand, included in Contract termination. Mr Lane stepped down as a member of the Executive Board effective immediately upon the announcement of the sale on 23 December A.H.A. Veenhof was Executive Board member until 24 February Contract termination concerns a severance payment of EUR 558 thousand awarded by a court decision on 22 December Based on final settlement in June 2010, an additional gross severance payment was made to Mr Veenhof of EUR 436 thousand. 6 P.H. Merckens started his employment with Wessanen on 1 April 2010, was appointed as member of the Executive Board by the AGM on 14 April 2010 and became CEO as per 1 June F.E. Eelkman Rooda will step down as CFO of Wessanen on or before 31 May Contract termination includes a contractual exit provision of EUR 365 thousand, to be awarded at that time. Financial statements

78 76 Notes to the consolidated financial statements 8. Personnel expenses and remuneration Executive Board and Supervisory Board continued Remuneration policy The remuneration for the members of the Executive Board comprises a base salary and related pension benefits and, subject to meeting performance criteria, short-term bonus and performance shares. The composition of the remuneration package is subject to annual review by the Selection, Appointment and Remuneration Committee (SARC). The main elements of the Remuneration Policy are included in the Annual Report. The Dutch members of the Executive Board are eligible to participate in the Wessanen Pension Plan. As of January 2007, the Wessanen Pension Plan has been changed (for all participants born after January 1, 1950) from a final pay defined benefit system to an average pay defined benefit system with a maximum of EUR 85,000 (increased from EUR 80,000 as from 1 January 2010). Above the amount of EUR 85,000 a defined contribution system is applicable. The pension policy for members of the Executive Board is based on retirement at the age of 65. Short-term bonuses to members of the Executive Board are granted according to performance criteria which in 2010 were based on earnings before interest and taxation (EBIT), annual revenue and net working capital (defined as the net balance of inventory, trade receivables, other receivables and prepayments, trade payables and non-trade payables and accrued expenses). Mr Merckens has a guaranteed bonus for 2010 at target. Restricted shares were granted in 2010 under vesting conditions based on a three-year service period and performance hurdles for the total test period of three years, as described in Note 9. Based on this plan, Wessanen granted 119,550 restricted shares to members of the Executive Board in In addition, 161,250 unconditional restricted shares were granted to Mr Merckens (of which 1/3 with a vesting period of one year, 1/3 with a vesting period of two years and 1/3 with a vesting period of three years) under the only restriction that Mr Merckens is in service at moment of vesting. In accordance with the Dutch Corporate Governance Code, members of the Executive Board are not allowed to sell any shares within five years after the date of grant. Supervisory Board remuneration Annual remuneration Other compensation 6 Total In EUR thousands F.H.J. Koffrie F. van Oers J.G.A.J. Hautvast D.I. Jager L.M. de Kool M.C. Lombard Total F.H.J. Koffrie stepped down from the Supervisory Board on 22 April 2009 and was temporarily interim CEO and chairman of the Executive Board. Mr Koffrie was re-appointed as member of the Supervisory Board on 1 June 2010 and became chairman of the Supervisory Board on 28 July F. van Oers was appointed as member of the Supervisory Board on 22 April D.I. Jager resigned from the Supervisory Board on 28 July L.M. de Kool resigned from the Supervisory Board on 14 April M.C. Lombard resigned from the Supervisory Board on 22 April Other compensation includes expense allowances. Members of the Supervisory Board receive annual remuneration amounting to EUR 45,000 each, excluding expenses. The chairman of the Supervisory Board receives an additional EUR 20,000. The chairman of the Audit Committee receives an additional EUR 10,000 and the chairman of the SARC receives an additional EUR 5,000. The proportionate amounts are included above, if applicable. No loans, advances or related guarantees were provided to the present or former members of the Executive Board or the Supervisory Board.

79 77 9. Share-based payments Stock option and restricted share plans are long-term incentives that aim to reward eligible employees for their contribution, loyalty and commitment to Wessanen. As of 2005, the Long Term Incentive Plan no longer comprises a stock option plan. All Wessanen stock options and restricted shares granted to the Executive Board are equity-settled share-based payments. The restricted shares granted to other employees are cash-settled share-based payments. The fair value of services received in return for restricted shares granted are measured by reference to the fair value of the restricted shares. The estimate of the fair value of the services received is measured based on a Monte Carlo simulation model. The model inputs for the valuation of the restricted shares granted to the members of the Executive Board and other employees can be specified as follows: Executive Board Other employees Share price at grant date Expected volatility 47.8% 37.8% 47.8% 37.8% Term (in years) Expected dividend Risk free interest rate 0.6% 1.7% 0.6% 1.7% Fair value at grant date In accordance with the Dutch Corporate Governance Code, the members of the Executive Board are not allowed to sell any delivered shares within five years after the date of the grant. The test period is three years similar to the shares granted to Other employees. The expected volatility has been determined based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information. Restricted shares are granted under service conditions, market conditions and non-market conditions. Only market conditions are taken into account in the fair value measurement of the restricted shares at grant date of the services received. Based on the Long Term Incentive Plan 2010, applicable as of June 2010, Wessanen granted restricted shares. Delivery of these performance shares depends on achievement of performance hurdles. As the performance hurdles for the Long Term Incentive Plan 2008 were not met, all 2008 conditional restricted shares granted forfeited. If a participant ceases to be employed by the Group for any other reason than death, disability or retirement, during the test period, all granted stock options and restricted shares lapse automatically unless otherwise decided by the Supervisory Board respectively Executive Board. All costs of the plans are borne by the Group; any and all taxes which arise are for the sole risk and account of the eligible employee. The main conditions of the stock option and restricted share plans issued can be summarised as follows: Stock option plans Number of instruments Vesting conditions Contractual life ,039 Three years of service 8 years ,530 Three years of service, profitability target 2004 greater than 0%, performance rating versus peer group at second anniversary of grant 8 years Restricted share plans Number of instruments Vesting conditions Contractual life ,305 Three years of service, Relative TSR over three years and development of share price over total test period of three years has to be positive 3 years ,870 Three years of service, Relative TSR over three years and development of share price over total test period of three years has to be positive 3 years ,000 Three years of service, Relative TSR over three years and development of share price over total test period of three years has to be positive (restricted shares granted to Executive Board) 3 years ,400 Three years of service and relative TSR over three years (restricted shares granted to Other employees) 3 years ,300 Three years of service and relative TSR over three years 3 years 1 In accordance with the Dutch Corporate Governance Code, the members of the Executive Board are not allowed to sell any delivered shares within five years after the date of the grant. Financial statements The total shareholder return (TSR) performance involves a comparison between the TSR of a peer group of leading multinational food companies over the same period. The peer group in 2010 consists of the following companies: Bonduelle, Bongrain, CSM, Ebro Puleva, Fleury Michon, Lotus Bakeries, Northern Foods, Nutreco, Premier Foods and Sligro. In 2010, total expenses arising from transactions accounted for as equity-settled and cash-settled share-based compensation transactions amounted to EUR 0.4 (2009: EUR 0.4). As at 31 December 2010, other provisions include an amount of EUR 0.3 (2009: EUR 0.3) related to cash-settled share-based payments (see Note 24).

80 78 Notes to the consolidated financial statements 9. Share-based payments continued Stock options The movement in the number of outstanding options is as follows: 31 December 2009 Granted Exercised Forfeited/ other changes 31 December 2010 Exercise price (in EUR) 1 To be exercised before Former members of the Executive Board ,000 (40,000) ,000 (250,000) , , December ,125 (28,125) Total (former) members of the Executive Board 420,814 (318,125) 102,689 Weighted average exercise price Other (former) employees ,495 (48,495) , , December ,228 (372) 148, November 2012 Total other (former) employees 322,223 (48,867) 273,356 Weighted average exercise price Total 743,037 (366,992) 376,045 1 Weighted average exercise price

81 79 9. Share-based payments continued Restricted shares The movement in the number of outstanding restricted shares is as follows: 31 December 2009 Granted Delivered Forfeited/ other changes 31 December 2010 To be delivered in 1 Members of the Executive Board P.H. Merckens ,750 53,750 April ,750 53,750 April ,750 53,750 April ,650 80,650 June 2013 F.E. Eelkman Rooda ,000 (10,000) ,000 28,000 June ,900 38,900 June 2013 Former members of the Executive Board K.R. Lane ,000 (19,000) ,500 (22,500) ,000 (28,000) A.H.A. Veenhof ,000 (10,000) Total (former) members of the Executive Board 117, ,800 (79,500) (10,000) 308,800 Other (former) employees ,291 (43,769) (6,522) ,045 (36,200) (64,845) ,7 247,650 (90,000) (14,550) 143,100 June ,500 (23,400) 306,100 June 2013 Total other (former) employees 398, ,500 (169,969) (109,317) 449,200 Total 516, ,300 (249,469) (119,317) 758,000 1 In accordance with the Dutch Corporate Governance Code, the members of the Executive Board are not allowed to sell any delivered shares within five years after the date of the grant. The test period is three years similar to the shares granted to Other employees. 2 K.R. Lane stepped down as member of the Executive Board as at 23 December 2009, the date of announcement of the sale of Tree of Life, Inc. All shares granted fully vested as of the closing date, being 29 January 2010 and were settled in cash. 3 Based on final settlement in June 2010, half of the conditional shares granted to A.H.A. Veenhof in 2007 and 2008 (being 11,750 and 12,500 shares respectively) were awarded. In addition, all unconditional shares granted to Mr Veenhof in 2006, 2007 and 2008 (being 10,000, 11,500 and 11,500 shares respectively) were awarded. 4 No performance hurdles. 5 No shares but performance incentive rights. A performance incentive right is a conditional right as set by the Company to receive remuneration in cash, whereby each performance incentive right has a value that is equal to the closing price of a share at Euronext Amsterdam on the day prior to the date of vesting. A performance incentive right does not entitle the employee to any right related to the share of the Company including but not limited to dividend or the right to vote. 6 32,800 of the 2007 shares, 36,200 of the 2008 shares and 90,000 of the 2009 shares granted vested at the closing date of the sale of Tree of Life, Inc., being 29 January Including 5,000 sign on shares, without performance hurdles. Financial statements

82 80 Notes to the consolidated financial statements 10. Net financing costs Interest income Interest expense (3.2) (8.4) Net foreign exchange gain/(loss) Net change in fair value of derivatives (3.0) (4.5) Interest expense defined benefit plans (1.2) (1.1) Transaction and commitment fees (0.2) (4.5) Other (0.8) (1.5) Total other financial income and expense (5.1) (11.5) Net financing costs (8.3) (19.9) Interest expense primarily originates from Wessanen s credit facilities to fund both continuing and discontinued operations, resulting in a recognised interest expense in 2010 of EUR 3.2 (2009: EUR 8.4). See Note 22 for more information on interest bearing loans and borrowings. Foreign exchange results on financing transactions and on financial assets and liabilities are presented as part of the total net foreign exchange gain/ (loss). Wessanen mitigates its foreign currency exchange exposure by entering into various financial instruments. For more information on Wessanen s foreign currency exposure and financial risk management reference is made to Note 26. The net change in fair value of derivatives mainly includes the Interest Rate Swap. During 2009, the hedge became ineffective as the Group progressed in its strategy to divest its North American businesses. Accordingly, since the second quarter of 2009, changes in the fair value of the Interest Rate Swap were directly recognised in the income statement, classified as net financing costs. Early April 2010, the Interest Rate Swap was terminated. Transaction and commitment fees in 2009 mainly include amendment fees paid in respect of the re-financing of the syndicated credit facility. Other financial expense mainly include factoring costs. 11. Income tax expense The income tax expense for the year 2010 amounted to EUR 0.2 (2009: EUR 69.0) and can be specified in current and deferred tax components as follows: Current income tax expense Current income tax expense (5.3) (2.5) Adjustment for prior years 3.3 (1.1) Total current income tax expense (2.0) (3.6) Deferred income tax expense Change in income tax rate (0.4) Deferred taxation relating to temporary differences Recognition of income tax losses 0.8 Utilisation of income tax losses (1.3) (5.5) Benefit from previously unrecognised income tax losses Reversal/(write-down) of deferred tax assets (3.5) (68.4) Over/(under) provided in prior years and other (1.1) 1.9 Total deferred income tax expense 1.8 (65.4) Total income tax expense (0.2) (69.0)

83 Income tax expense continued Effective income tax rate The Group s operating activities are subject to income taxes in various countries with statutory income tax rates between 25% and 40%. The following table reconciles the domestic income tax rate as a percentage of profit before income tax with the effective income tax rate as shown in the consolidated income statement Reconciliation of effective income tax rate EUR % EUR % Profit before income tax (3.0) (64.3) Income tax using the domestic income tax rate Effect of income tax rates in foreign jurisdictions (1.1) (35.8) Change in income tax rate (0.4) (13.0) 0.0 Non-deductible expenses and tax exempt income (1.0) (34.9) (8.5) (13.2) Recognition of unrecognised income tax losses Unrecognised income tax losses for the year (1.1) (36.8) (13.6) (21.1) Reversal/(write-down) of deferred tax assets (3.5) (115.1) (68.4) (106.4) Over/(under) provided in prior years and other Income tax expense in income statement (0.2) (7.6) (69.0) (107.3) Non-deductible expenses and tax exempt income in both 2010 and 2009 mainly result from non-deductible goodwill impairment losses recognised. 12. Disposal groups and discontinued operations The following balances of assets and liabilities are classified as held for sale as at 31 December 2010 and 2009 respectively, because the carrying amount of these assets and liabilities are expected to be recovered through a sales transaction rather than through continuing use: Assets related to disposal groups 13.5 Assets related to discontinued operations Total assets classified as held for sale Liabilities related to disposal groups 6.3 Liabilities related to discontinued operations 66.6 Total liabilities classified as held for sale Disposal groups Following the strategy update in Fall 2010, Wessanen started a review of its strategic options in respect of its UK HFS business. As it is Wessanen s expectation that a sale of the UK HFS business can be concluded in the course of 2011, the UK HFS business has been classified as a disposal group held for sale as per 31 December The accompanying re-measurement of the net asset value of our UK HFS business revealed recognition of an impairment loss of EUR 4.2 on goodwill. Assets held for sale related to disposal groups The combined carrying amounts of the major classes of assets and liabilities classified as held for sale related to disposal groups at year end are as follows: Financial statements 31 December 31 December Non-current assets 4.5 Current assets 9.0 Assets related to disposal groups 13.5 Non-current liabilities Current liabilities 6.3 Liabilities related to disposal groups 6.3 Net assets related to disposal groups 7.2

84 82 Notes to the consolidated financial statements 12. Disposal groups and discontinued operations continued Discontinued operations In accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, the North American Distribution operations (Tree of Life, Inc.) and the operations of PANOS Brands and Liberty Richter (the latter two were both part of the North America Branded segment in prior periods) were classified as discontinued operations in the third quarter of In addition, the operations of Karl Kemper (Germany) and Righi (Italy) (both part of the Frozen Foods segment in prior periods) were classified as discontinued operations in the course of the third quarter of Management committed to a plan to sell these operations following the strategic decision to focus on expansion of Wessanen s presence in the European organic food markets through autonomous growth and acquisitions. In 2009 Karl Kemper, Righi and Liberty Richter were divested. In 2010 Tree of Life, Inc. and PANOS Brands LLC were divested. On 23 December 2009 Wessanen reached an agreement with Kehe Food Distributors, Inc. to sell Tree of Life, Inc., effectively as per 29 January 2010, for USD 190, subject to normal working capital adjustments and potential adjustments to operating result before interest expense, income tax, depreciation and amortisation (EBITDA) depending on Tree of Life s operating performance prior to closing. The final settled sales price amounts to USD 194, excluding expenses. On 17 December 2010 Wessanen reached an agreement with High Road Capital Partners I, L.P. to sell PANOS Brands LLC, effectively as per 17 December 2010, for USD 22, subject to normal working capital adjustments. Per 31 December 2010 no assets are classified as discontinued operations. Assets held for sale related to discontinued operations The combined carrying amounts of the major classes of assets and liabilities classified as held for sale related to discontinued operations at year end are as follows: 31 December December 2009 Non-current assets 9.5 Current assets Assets related to discontinued operations Non-current liabilities 6.1 Current liabilities 60.5 Liabilities related to discontinued operations 66.6 Net assets related to discontinued operations Result from discontinued operations The total result from discontinued operations can be specified into the operating result from discontinued operations, the result recognised on re-measurement of assets of discontinued operations and the result on divestment of discontinued operations as follows: Net sales Operating result Net financing costs (0.7) Profit/(loss) before income tax Share in results of associates 0.1 Income tax expense (0.3) (45.3) Profit/(loss) after tax from discontinued operations 1.7 (43.0) Pre-tax gain/(loss) recognised on the re-measurement of assets of discontinued operations (46.1) Income tax expense 0.2 After tax gain/(loss) recognised on the re-measurement of assets of discontinued operations (45.9) Pre-tax gain/(loss) on the divestment of discontinued operations (2.7) 1.9 Income tax expense (0.8) (1.3) After tax gain/(loss) recognised on the divestment of discontinued operations (3.5) 0.6 Result for the year from discontinued operations (1.8) (88.3)

85 Disposal groups and discontinued operations continued Result on divestment of discontinued operations The following table presents a reconciliation between net assets divested, proceeds on the divestment of discontinued operations and the result of the divestment: 31 December 31 December Non-current assets Current assets Non-current liabilities (6.3) (1.0) Current liabilities (57.2) (15.0) Net assets divested Consideration received in cash, net of expenses Proceeds to be received 3.6 Total proceeds on the divestment Net assets divested (130.8) (6.7) Foreign exchange result on transaction (0.2) Cumulative exchange rate differences transferred from equity (6.8) (0.8) Income tax expense (0.8) (1.3) After tax gain/(loss) recognised on the divestment of discontinued operations (3.5) Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders by the weighted average number of outstanding shares, which can be specified as follows: Profit attributable to equity holders of Wessanen Profit/(loss) after income tax from continuing operations (3.2) (133.3) Profit/(loss) from discontinued operations, net of income tax (1.8) (88.3) Non-controlling interests (1.1) 1.9 Profit/(loss) for the period attributable to equity holders of Wessanen (6.1) (219.7) Number of ordinary shares (in thousands) Issued ordinary shares 75,195 68,359 Own shares, held by the Company (376) (743) Number of ordinary shares at year end 74,819 67,616 Weighted average number of ordinary shares 73,229 67,609 Earnings per share from continuing operations (0.06) (1.94) Earnings per share from discontinued operations (0.02) (1.31) Total earnings per share (0.08) (3.25) Financial statements Diluted earnings per share In the calculation of diluted earnings per share, the applicable profit and the weighted average number of outstanding shares are adjusted for the potential impact of stock options exercised and restricted shares delivered.

86 84 Notes to the consolidated financial statements 13. Earnings per share continued Weighted average number of ordinary shares (diluted) (in thousands) Weighted average number of ordinary shares 73,229 67,609 Effect of stock options Effect of restricted shares 2, Weighted average number of ordinary shares (diluted) 75,356 67,919 Diluted earnings per share from continuing operations (0.06) (1.94) Diluted earnings per share from discontinued operations (0.02) (1.31) Total diluted earnings per share (0.08) (3.25) 14. Property, plant and equipment Land and buildings Machinery and equipment Under construction and pre-payments Other Total 2009 Carrying value at beginning of year Effect of movements in foreign exchange rates (0.8) 0.1 (0.7) Capital expenditure Financial leases Completed construction (8.0) Disposal (0.3) (1.1) (1.4) Transfer to held for sale (10.3) (11.6) (0.8) (0.4) (23.1) Depreciation (3.4) (8.9) (2.5) (14.8) Impairment (3.1) (1.6) (0.8) (5.5) Carrying value at year end Accumulated depreciation and impairment losses Cost at year end Carrying value at beginning of year Effect of movements in foreign exchange rates Capital expenditure Acquisitions through business combinations Completed construction (2.2) Disposal (0.4) (0.1) (0.5) Transfer to held for sale (3.5) (0.9) (4.4) Depreciation (2.2) (7.8) (2.3) (12.3) Impairment (0.2) (0.1) (0.3) Carrying value at year end Accumulated depreciation and impairment losses Cost at year end Impairments Impairments on property, plant and equipment have been recognised by Corporate entities and Frozen Foods in the amount of EUR 0.1 and EUR 0.2 respectively (2009: EUR 5.5). The impairments in 2009 consists of impairments recognised by Wessanen s American Beverage Corporation (ABC) and the Frozen Foods segment in the amount of EUR 5.1 and EUR 0.4 respectively. The present value of estimated future cash flows has been calculated using a pre-tax discount rate of 13.3% (2009: 12.7%) in respect of our UK businesses, 12.7% (2009: 12.7%) in respect of our other European businesses and 14.7% (2009: 14.7%) in respect of our North American businesses. Finance leases The carrying value of land and buildings and machinery and equipment includes an amount of EUR 1.0 (2009: EUR 1.5) in respect of assets held under finance leases. Wessanen does not have legal title of these assets. Security Except for the leased assets, no other restrictions on title exist and no property, plant and equipment is pledged as security for liabilities.

87 Intangible assets Customer relationships Business acquisitions Development expenses and other Goodwill Brands Software Total 2009 Carrying value at beginning of year Effect of movements in foreign exchange rates Capital expenditure Acquisitions through business combinations Disposal (0.5) (0.5) Reclassifications Amortisation (1.0) (0.3) (0.5) (0.6) (2.4) Impairment (27.7) (4.8) (6.2) (0.9) (1.3) (40.9) Transfer to held for sale (14.8) (4.4) (0.7) (0.8) (0.1) (0.3) (21.1) Carrying value at year end Accumulated amortisation and impairment losses Cost at year end Carrying value at beginning of year Effect of movements in foreign exchange rates Capital expenditure Acquisitions through business combinations Amortisation (0.6) (0.9) (0.1) (1.6) Impairment (4.2) (4.5) (8.7) Transfer to held for sale (0.1) (0.1) Carrying value at year end Accumulated amortisation and impairment losses Cost at year end Acquisitions through business combinations The acquisition of Kroon BV led to capitalisation of goodwill in the amount of EUR 2.6 in 2010 (see Note 5). Intangible assets from acquisitions through business combinations in 2009 of EUR 1.8 consists of goodwill capitalised related to the acquisition of the remaining minority shares of Distriborg Groupe, the capital contribution to Favory Convenience Food Group and the acquisition of Warehouse Vitamins Inc. Impairment testing for cash-generating units containing goodwill and brands Goodwill and brands with an indefinite life are tested for impairment annually, or more frequently if there are indications that a particular cash-generating unit might be impaired. The following segments have significant carrying values of goodwill and brands: 31 December December 2009 Goodwill Brands Total Goodwill Brands Total Wessanen Europe Grocery Wessanen Europe HFS Frozen Foods American Beverage Corporation Carrying value at year end Financial statements The recoverable amount for all cash-generating units (level below segment level) is based on value-in-use calculations. Value-in-use calculations use cash flow projections covering a maximum period of five years that are based on three-year financial budgets approved by company management. A specific Weighted Average Cost of Capital (WACC) has been used for our UK businesses (13.3%), our other European businesses (12.7%) and our North American businesses (14.7%), respectively, in discounting the projected cash flows. The pre-tax WACC reflects the current market assessment of the time value of money and the specific risks of the cash-generating unit. The terminal value is based on a stable growth rate of 1-2% (inflation rate).

88 86 Notes to the consolidated financial statements 15. Intangible assets continued In 2010 an impairment loss has been recognised of EUR 8.7 (2009: EUR 40.9), allocated to a brand at Wessanen Europe Grocery (EUR 4.5) and goodwill at Wessanen Europe HFS (EUR 4.2). Security No restrictions on title exist and no intangible assets are pledged as security for liabilities. 16. Investments in associates and other investments Investments in associates and other investments mainly includes equity investments of EUR 0.0 (2009: EUR 0.1), debt securities of EUR 0.8 (2009: EUR 3.1) and a long term receivable related to the sale of Liberty Richter in 2009 of EUR 0.8 (2009 EUR 0.0). 17. Deferred tax assets and liabilities Recognised deferred tax assets and liabilities The significant components of deferred tax assets and liabilities can be specified as follows: Balance 31 December 2008 Effect of movement in foreign exchange rates Recognised in profit or loss Recognised in other comprehensive income Transfer to held for sale Balance 31 December 2009 Intangible assets (1.6) (9.0) Inventories 0.6 (0.6) Trade and other receivables 2.2 (1.2) (0.9) 0.1 Interest-bearing loans and borrowings (12.0) (3.8) (1.0) Provisions 7.6 (5.3) (1.8) 0.5 Trade and other payables and accrued expenses (2.7) (4.1) 0.8 Tax of loss carry-forward (79.6) 3.3 Total deferred tax assets (96.3) (6.5) (17.4) 4.7 Property, plant and equipment (9.3) (0.1) (1.6) Other items (4.4) 3.0 (1.4) Total deferred tax liabilities (13.7) (0.1) (3.0) Net deferred tax assets (86.9) (6.5) (16.0) 1.7 Balance 31 December 2009 Effect of movement in foreign exchange rates Recognised in profit or loss Recognised in other comprehensive income Transfer to held for sale Balance 31 December 2010 Inventories Trade and other receivables 0.1 (0.1) Interest-bearing loans and borrowings 0.2 (0.2) Provisions Trade and other payables and accrued expenses (0.1) 1.2 Tax of loss carry-forward (0.9) 3.3 Total deferred tax assets (0.3) (0.9) 5.0 Property, plant and equipment (1.6) (0.2) (1.8) Intangible assets (0.8) (0.8) Other items (1.4) 1.4 Total deferred tax liabilities (3.0) 0.4 (2.6) Net deferred tax assets (0.3) (0.9) 2.4

89 Deferred tax assets and liabilities continued 31 December December 2009 Net deferred tax assets/(liabilities) are presented as follows: Deferred tax assets presented under non-current assets Deferred tax liabilities presented under non-current liabilities (1.3) (2.6) Net deferred tax assets Unrecognised/impaired deferred tax assets The unrecognised/impaired deferred tax assets can be specified as follows per expiration date: 31 December 2010 Expiration date Expiration date Expiration date Expiration date 2014 Expiration date 2015 and future years Total unrecognised/impaired deferred tax assets Up to and including 2010 Wessanen has unrecognised deferred tax assets related to temporary differences and tax losses carried forward from continuing operations in the United States, the Netherlands and Italy for the amount of EUR in total (2009: EUR 83.1), as it is not probable that sufficient taxable profits will be available to utilise the tax benefits. In that respect, in 2010 Wessanen recorded an additional amount of unrecognised deferred taxes of continuing operations of EUR 43.4, due to a re-allocation from (unrecognised) deferred tax assets from discontinued to continuing operations also with additional tax losses incurred upon divestments, unrecognised tax losses for the current year, prior year adjustments and currency effects. In 2009 Wessanen recognised impairments in respect of deferred tax assets related to tax losses carried forward from continuing operations for the amount of EUR 59.3 as it was no longer probable that sufficient taxable profits would be available to allow the benefits to be utilised due to changed circumstances. 18. Inventories 31 December December 2009 Finished products Semi-finished products Raw materials and supplies Total inventories In 2010 the write-down of inventories to net realisable value amounted to EUR 1.6 (2009: EUR 0.8). The write-down is included in cost of raw materials and supplies. 19. Trade and other receivables and prepayments Trade receivables are shown net of impairment losses in the amount of EUR 3.9 (2009: EUR 4.4) arising from identified doubtful receivables from customers. Financial statements The Group s exposure to credit and currency risks and impairments losses related to trade and other receivables and prepayments are disclosed in Note Cash and cash equivalents 31 December December 2009 Cash 0.1 Banks Cash and cash equivalents Bank overdrafts (1.1) (24.1) Cash and cash equivalents in the statement of cash flows

90 88 Notes to the consolidated financial statements 20. Cash and cash equivalents continued Cash and cash equivalents are at Wessanen s free disposal as at 31 December The Group s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note Equity attributable to equity holders of Wessanen Issued and paid-up share capital The authorised share capital of the Company as at 31 December 2010 consists of 300 million ordinary shares (2009: 300 million shares) with a nominal value of EUR 1.00, of which 75.2 million shares were issued and paid-up (2009: 68.4 million shares). The holders of ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share at the shareholders meetings of Wessanen. The Company s shares that are held by Wessanen are entitled to dividend. Reserve for own shares The reserve for the Company s own shares comprises the cost of the Company s shares, held by Wessanen. As at 31 December 2010 Wessanen held 376,045 shares (2009: 743,037). The movements in the reserve for own shares can be summarised as follows: Number of shares x 1,000 Amount Number of shares x 1,000 Amount Balance at beginning of the year 743 (6.0) 758 (6.2) Sale of own shares (310) 2.5 Share options exercised/shares delivered (57) 0.5 (15) 0.2 Balance at year end 376 (3.0) 743 (6.0) Translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations as well as from the translation of intercompany loans with a permanent nature and liabilities that hedge Wessanen s net investment in foreign subsidiaries. Hedging reserve The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments (foreign currency forward contracts and Interest Rate Swaps) related to hedged transactions that have not yet occurred. Other legal reserves In accordance with the Netherlands Civil Code, a legal reserve is established of EUR 1.1 as at 31 December 2010 (2009: EUR 0.1) related to the capitalisation of (software) development expenses (see Note 15). Dividends The Executive Board, with the approval of the Supervisory Board, proposes that a dividend of 0.05 eurocent per share will be paid in 2011 with respect to The dividend will be paid either wholly in cash or in new shares, at the option of the shareholder and will be charged to the share premium reserve, subject to approval by the Annual General Meeting of Shareholders. It has not been included as a liability on the consolidated statement of financial position as per 31 December The payment of this dividend will not have income tax consequences for the Company Dividends declared and paid in the year 22. Interest-bearing loans and borrowings Interest-bearing loans and borrowings can be specified as follows: Current portion 31 December December 2009 Non-current Current Non-current portion Total portion portion Total Syndicated loans Finance leases Other long-term loans Total The current portion of the interest-bearing loans and borrowings, due to be paid in 2011, is included in current liabilities.

91 Interest-bearing loans and borrowings continued Syndicated loans Syndicated loans consists of EUR 35 floating rate borrowings as at 31 December 2010 (2009: USD 136 and EUR 110 respectively) under a EUR 100 (2009: EUR 250), multi-currency credit facility. The facility size was mandatorily reduced to EUR 100 after the sale of Tree of Life, Inc. The Group has the ability to draw loans from the syndicated credit facility with maturities ranging between 1 month and 1 year. When a loan expires, this is, ceteris paribus, refinanced with a new loan drawn from the facility. Total syndicated loans decreased by EUR to EUR 35.0 as at 31 December 2010, mainly as a result of repayments made following the divestment of Tree of Life, Inc. in January 2010, the divestment of PANOS Brands LLC in December 2010 and an equity offering during the first quarter of The facility has various general and financial covenants in place which are customary for its type, amount and tenor. Wessanen should not declare or pay a dividend exceeding 45% of its net result, excluding major non-recurring items. There are certain restrictions in place in case of acquisitions. Under the financial covenants of the facility, Wessanen had to ensure that at the end of the fourth quarter of 2009, total net debt did not exceed 4.0 times consolidated earnings before interest, taxation, depreciation, amortisation and exceptional items ( EBITDAE ). Although Wessanen exceeded this financial covenant at year end 2009, it received a waiver early 2010 from the syndicated banks for this event of default. As a result of non-compliance with this convenant at year end 2009, the syndicated loans were presented under current liabilities as at 31 December Since then, Wessanen has not breached any of its covenants. Accordingly, syndicated loans are presented under non-current liabilities as at 31 December 2010 and reflect the maturity of the facility until February Interest is based on the relevant floating rate (EURIBOR or LIBOR) plus a margin. During 2010, the margin was between 150 to 300 basis points dependent on the net debt to EBITDAE ratio. The average interest rate for 2010 is 2.9% (2009: 3.5%). Finance leases Non-cancellable finance leases are payable as follows: Total lease payments Carrying Total lease Carrying value payments Interest value Interest Less than 1 year Between 1 and 5 years More than 5 years Total Other long-term loans Other long-term loans as at 31 December 2010, consist of EUR 0.0 floating rate borrowings (2009: EUR 4.4) under a EUR 5.5 credit facility (2009: EUR 5.5) and other floating rate bank loans of EUR 1.1 (2009: EUR 1.6), both to Favory Convenience Food Group. The average interest rates for 2010 related to these borrowings are 5.9% and 4.7% respectively (2009: 6.0% and 3.3% respectively). 23. Employee benefits Defined benefit plans Royal Wessanen nv and its subsidiaries make contributions to defined benefit plans in the Netherlands, Germany and France, that provide pension benefits for employees upon retirement. These are final-pay and average-pay plans, based on the employees years of service and compensation near retirement. The schemes are administered by industry pension funds and life insurance companies. During 2008, the defined benefit plan for corporate staff in the Netherlands as well as the accompanying net defined benefit obligation was transferred from the independent Company pension fund to an insurance company. The wind up of the company pension fund has been completed. Financial statements The net obligation for defined benefit plans is calculated separately for each plan by calculating the present value of future benefits that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine the present value while the fair value of any plan asset is deducted. The discount rate used is the yield on high-quality corporate bonds of a currency and maturity consistent with the currency and maturity of the post-employment defined benefit obligations. The calculations are performed by qualified actuaries using the projected unit credit method. The pension liabilities in the scheme for corporate staff in the Netherlands (EUR 55.8) are directly insured with Swiss Life. The fair value of the insurance asset amounts to EUR 54.1, which equals the value in the separate account with the insurer. Multi-employer plans The Dutch companies are engaged in multi-employer plans with Stichting Bedrijfspensioenfonds voor de Groothandel in Levensmiddelen and Stichting Bedrijfspensioenfonds voor de vlees-, vleeswaren- en de gemaksvoedingindustrie. These multi-employer plans are defined benefit plans, though accounted for as if they were defined contribution plans because it is not possible to identify the Companies shares of the underlying financial position and performance of the plan with sufficient reliability for accounting purposes. This is due to the fact that the plans expose the

92 90 Notes to the consolidated financial statements 23. Employee benefits continued participating entities to actuarial risks associated with the current and former employees of other entities. Surpluses or deficits for the mentioned plans are determined on the basis of Actuariële principes pensioenfondsen and Richtlijnen van De Nederlandse Bank 30 September The Stichting Bedrijfspensioenfonds voor de Groothandel in Levensmiddelen and the Stichting Bedrijfspensioenfonds voor de vlees-, vleeswaren- en de gemaksvoedingindustrie both show a deficit for which recovery plans have been made comprising of adjustments in contributions and restriction of indexations. Defined contribution plans In the North American companies the pension arrangements consist of defined contribution plans. The components of the employee benefits for the years ending 31 December 2010 and 2009 respectively are shown in the following tables. Defined benefit plans 31 December December 2009 Defined Benefit plans Present value of unfunded obligations Present value of funded obligations Total present value of obligations Fair value of plan assets (66.8) (61.4) Deficit Unrecognised actuarial gains and losses Unrecognised past service costs (1.0) (1.1) Net liability for defined benefit obligations Other employee benefits Total liability employee benefits Movement in the liability for defined benefit obligations Liability for defined benefit obligations at beginning of year Benefits paid (2.5) (2.6) Employee contributions Current service costs Interest costs Actuarial gains/(losses) Liability for defined benefit obligations at year end Movement in plan assets Fair value of plan assets at beginning of year Employer contributions Employee contributions Benefits paid (2.6) (2.7) Expected return on plan assets Actuarial gains/(losses) Fair value of plan assets at year Plan assets The pension plan asset allocation can differ per plan, and can be specified as follows (on a weighted average basis): 31 December December 2009 Equity securities 7.4% 7.7% Bonds 73.9% 73.6% Other 18.7% 18.7% Total 100.0% 100.0%

93 Employee benefits continued Expense recognised in the income statement Current service costs Past service costs Interest costs Expected return on plan assets (2.6) (2.7) Amortisation unrecognised net (gain)/loss (0.1) (0.3) Total expense The expense is recognised in the following line items in the income statement: Personnel expenses Net financing costs Total expense Actual return on plan assets (2.8) (2.8) The expected contributions for defined benefit plans in 2011 amount to EUR 3.3. Actuarial assumptions Principal actuarial assumptions at the balance sheet date: 2010 Euro-zone 2009 Euro-zone Discount rate at year end % % Expected return on plan assets at year end % % Future general salary increases % % Price inflation 2.0% 2.0% Future pension increases % 2.0% Expected return on plan assets at year end The Netherlands For the major plan the expected return has been determined as the weighted average of the individual asset returns per asset class reflecting the current asset mix (Equities: 10%, Bonds: 90%). The expected return rates on the asset classes are 7.40% for equities and 3.50% for bonds, based on assumption guidelines of our actuary as per 31 December France The assets are locally held in bonds. The return on asset assumption is based on the assumptions model and research of our actuary and an assumed asset mix of 50% government bonds and 50% high quality corporate bonds. Germany The plan is unfunded. Financial statements Actual return on plan assets The actual return on plans assets for 2010 amounted to 10.5%. Sensitivity analysis A reduction in the discount rate by 25 basic points would result in an increase in the liability for defined benefit obligations of EUR 3.2 as per 31 December 2010 (2009: EUR 3.0). Assumptions regarding further mortality are based on published statistics and mortality tables.

94 92 Notes to the consolidated financial statements 23. Employee benefits continued Present value of the defined benefit obligation, fair value of plan assets and deficit Defined benefit obligation Fair value of plan assets (66.8) (61.4) (58.5) (60.5) (63.8) Deficit in the plan Experience adjustments arising on plan liabilities and plan assets Plan liabilities Plan assets (5.3) (5.8) 1.0 Experience adjustments are defined as all gains/(losses) due to changes other than changes in the discount rate. 24. Provisions Movements in provisions can be specified as follows: Restructuring Other provisions Total Non-current Current Balance at beginning of year Effects of movements in foreign exchange rates Additions charged against result Used during the year (3.4) (1.0) (4.4) Reclasses 1.7 (1.4) 0.3 Balance at year end Non-current Current Balance at year end Restructuring The provision for restructuring relates to restructurings at various sites. Other provisions Other provisions mainly comprises provisions for contract risks of EUR 1.9, legal risks of EUR 2.7 and liabilities arising from cash-settled share-based payment transactions of EUR 0.3. Releases of prior year provisions are accounted for in operating result. 25. Trade and non-trade payables and accrued expenses 31 December December 2009 Trade payables third party Trade payables associates Total trade payables Customer incentives Personnel expenses Pensions Social securities and other taxes Interest payables Derivatives 4.9 Other liabilities Total non-trade payables and accrued expenses Total trade and non-trade payables and accrued expenses The Group s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 26.

95 Financial instruments and risk management This note presents information about Wessanen s exposure to liquidity risk, market risk and credit risk, Wessanen s objectives, policies and processes for measuring and managing risk, and Wessanen s management of capital, as well as quantitative disclosures (before income tax) in addition to those included throughout these consolidated financial statements. The Executive Board has overall responsibility for the establishment and oversight of Wessanen s Risk Management and Internal Control system. The system is designed to enable the Executive Board to achieve its strategic objectives within a managed risk profile. The Executive Board is responsible for setting risk management policies and strategies. Senior management and operating companies conduct a risk assessment to create action plans and execute internal control procedures. As a Committee of the Supervisory Board, the Audit Committee monitors risk management and control activities and provides the Supervisory Board with a clear overview of the entire risk management and internal control process. Any significant changes and improvements to the Risk Management and Internal Control system are discussed with the Audit Committee and the Supervisory Board. Liquidity risk Liquidity risk is the risk that Wessanen will not be able to meet its financial obligations as they fall due. A material and sustained shortfall in Wessanen s cash flow could undermine overall investor confidence and could restrict the Group s ability to raise funds. Operational cash flow provides the funds to service the Group s financing obligations. The Group s objective to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its financial obligations when due, without incurring unacceptable losses or risking damage to the Group s reputation. Wessanen manages its liquidity by monitoring and forecasting cash flows of its operating companies, debt servicing requirements, dividends to shareholders, and other obligations. The Group s syndicated credit facility allows to draw in maturities ranging between a month and a year, while its other credit facilities also allow to draw for shorter periods. When a loan expires, this is ordinarily refinanced with a new loan drawn from the facility. In addition to the syndicated loan facitility, Wessanen has EUR 50 of uncommitted credit facilities with various banks throughout the Group. Favory Convenience Food Group has a EUR 5.5 credit facility. The table below summarises the maturity profile of Wessanen s financial liabilities, including estimated interest payments at 31 December 2010 and at 31 December 2009 based on contractual undiscounted cash flows. Carrying Total amount cash flows 6 months or less Undiscounted contractual cash flows 6-12 More than months 1-2 years 2-5 years 5 years 2009 Note Non-derivative financial liabilities Syndicated loans 22 floating (204.5) (205.0) (205.0) Other long-term loans 22 floating (6.0) (7.4) (0.4) (0.4) (0.8) (1.4) (4.4) Finance lease liabilities 22 fixed (0.7) (0.9) (0.3) (0.2) (0.4) Trade and other payables¹ 25 bearing (139.1) (139.1) (139.1) non-interest Bank overdrafts 20 floating (24.1) (24.1) (24.1) Subtotal (374.4) (376.5) (368.9) (0.6) (1.2) (1.4) (4.4) Derivative financial instruments Interest rate swaps used for hedging and corresponding interest flows (6.1) (6.1) 1.1 (2.1) (1.0) (3.0) (1.1) Other forward contracts used for hedging (0.2) (0.2) (0.2) Subtotal (6.3) (6.3) 0.9 (2.1) (1.0) (3.0) (1.1) Total (380.7) (382.8) (368.0) (2.7) (2.2) (4.4) (5.5) ¹ Excluding interest IRS and derivatives. Financial statements

96 94 Notes to the consolidated financial statements 26. Financial instruments and risk management continued Carrying Total amount cash flows 6 months or less Undiscounted contractual cash flows 6-12 More than months 1-2 years 2-5 years 5 years 2010 Note Non-derivative financial liabilities Syndicated loans 22 floating (35.0) (36.1) (0.5) (0.4) (35.2) Other long-term loans 22 floating (1.1) (1.3) (0.2) (0.1) (0.3) (0.5) (0.2) Finance lease liabilities 22 fixed (0.4) (0.4) (0.2) (0.2) Trade and other payables¹ 25 bearing (128.6) (128.6) (128.6) non-interest Bank overdrafts 20 floating (1.1) (1.1) (1.1) Subtotal (166.2) (167.5) (130.6) (0.7) (35.5) (0.5) (0.2) Derivative financial instruments Other forward contracts used for hedging Subtotal Total (166.2) (167.5) (130.6) (0.7) (35.5) (0.5) (0.2) ¹ Excluding interest IRS and derivatives. Currency risk Wessanen conducts business in foreign currencies but publishes its financial statements, and measures its performance, in Euros. These foreign currencies mainly include the US dollar, the Canadian dollar and the Pound sterling. Because of the Group s international presence, it is subject to risks from changes in foreign currency values that could affect earnings and capital. The sale of Tree of Life, Inc., on 29 January 2010 has significantly reduced the Group s exposure to the US Dollar and the Canadian Dollar (see Note 12). The Group has a foreign exchange policy that mitigates the impact of foreign currencies to functional currencies and is based on the following principles: Transactions arising from operational and financing activities, in currencies other than the functional currency, are hedged in order to mitigate income statement volatility. All operating companies conduct their hedging transactions internally through the centralised corporate treasury department. Wessanen provides operational funding to its operating companies in their functional currency. Translation results on capital invested in foreign subsidiaries are recorded as a movement in the translation reserve in equity. Capital invested in, and net income from foreign subsidiaries are not hedged to the Euro. Further, hedging of foreign exchange risk is achieved through the use of forward foreign exchange contracts and forward foreign exchange swaps. Hedge accounting is applied for transactions that exceed certain thresholds. In 2010, currency translation effects were EUR 13.4 (2009: EUR 12.8). The Group s balance sheet exposure to foreign currency risk was as follows based on notional amounts: 31 December December 2009 EUR USD GBP Other¹ EUR USD GBP Other¹ Trade receivables Cash and bank overdrafts (0.2) (33.6) 0.2 Trade payables 2 (3.4) (0.1) (0.1) (1.2) (3.6) (1.1) (0.1) (0.6) Financial assets, excluding investments in subsidiaries (6.7) (5.1) (0.7) (0.6) Interest-bearing loans and borrowings (136.0) Derivatives Net exposure (0.1) 2.3 (0.1) 3.4 (0.5) ¹ In EUR. 2 Including currency risk of Tree of Life UK (asset held for sale). 3 Represents forward foreign exchange contracts related to future purchase commitments, as well as foreign exchange swaps. The opposite currency of such contracts and swaps is mainly EUR, USD or GBP.

97 Financial instruments and risk management continued In the first quarter of 2010 an USD 136 loan drawn under the credit facility at year end 2009 (see Note 22) for the financing of the North American businesses, was redeemed with the proceeds from the sale of Tree of Life, Inc. At year end the Group designated USD 133 (2009: USD 200) of intercompany loan financing as part of its net investment in its remaining US operations. Foreign currency results on this intercompany financing are recorded in the translation reserve in equity of EUR 9.4 positive (net of income tax) in 2010 and EUR 7.4 negative (net of income tax) in A 10% strengthening of the euro against the USD and GBP currencies in 2010 would have hypothetical impact on equity and profit for both continuing and discontinued operations by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis has been performed on the same basis as for USD GBP USD GBP 10% strengthening of the Euro Equity¹ (4.4) (2.7) (4.3) (3.7) Net result (0.7) (0.2) ¹ Including P&L impact. Interest rate risk Wessanen s debt funding is primarily achieved through its multi-currency syndicated credit facility. Loan draw-downs bear interest at short term rates. These may fluctuate and cause income statement volatility. The Group aims to contain income statement volatility and, at the same time, minimise its financing costs. We manage our interest rate risk through closely monitoring short term and long term interest rates and where necessary modifying the interest rate exposure of debt and cash positions through the use of interest rate derivatives. A change of 100 basis points (bp) in variable interest rates in 2010 would have a hypothetical impact on equity and profit by the amounts shown below. The analysis assumes that all other variables, in particular foreign currency rates, remain constant. The major part of this positive effect on net result in 2009 stems from the IRS, under the assumption that an interest increase impacts future cash flow obligations on the IRS, and thus impacts the market value of the IRS, changes of which are directly accounted for in the income statement. Profit or loss Equity¹ bp increase 100 bp decrease 100 bp increase 100 bp decrease Variable rate instruments (1.8) 1.8 (1.8) 1.8 Interest rate swap 4.2 (4.2) 4.2 (4.2) Net impact 2.4 (2.4) 2.4 (2.4) 2010 Variable rate instruments (0.4) 0.4 (0.4) 0.4 Interest rate swap Net impact (0.4) 0.4 (0.4) 0.4 ¹ Including P&L impact. Commodity risk Wessanen requires a wide range of agricultural and other commodities for its products. Fluctuations in commodity prices may lead to volatility in net income. In addition, increases in commodity prices may lead to a reduction in margin and net income when corresponding or selling prices can not be raised. The Group uses a large variety of commodities and is not exposed to a significant concentration in one single category. In general, Wessanen aims to mitigate volatility in commodity prices by frequently entering into term price agreements with suppliers, providing sufficient time to increase the selling prices of our products. Financial statements Credit risk Credit risk is the risk of financial loss to Wessanen if a customer or any other counterparty to a transaction fails to meet its contractual obligations. As the exposure to credit risk is influenced mainly by the individual characteristics of each customer, the spread in Wessanen s customer base reduces the impact of the credit risk. Moreover, a customer s creditworthiness is analysed frequently using benchmarks and external rating information. As a preventive control, and more and more an automated control, Wessanen manages credit risk by applying credit limits for its customers. The creditworthiness of a financial institution is assessed by their credit rating, which should be a minimum of A (Standard & Poor s).

98 96 Notes to the consolidated financial statements 26. Financial instruments and risk management continued Wessanen establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets. The maximum exposure to credit risk for trade receivables by type of customer can be specified as follows: 31 December December 2009 Supermarkets Natural / Health food stores Other customers Total The aging of trade receivables at balance sheet date can be specified as follows: 31 December December 2009 Gross Impairments Net Gross Impairments Net Not past due Past due 0-30 days 7.0 (0.4) Past due days 5.4 (2.0) (3.1) 2.5 Past due days 0.3 (0.3) 0.5 (0.5) More than 360 days 1.2 (1.2) 0.8 (0.8) Total 70.3 (3.9) (4.4) 69.5 The movement in the allowance for impairments in respect of trade receivables during the year was as follows: Balance at beginning of year Transfer to held for sale (0.3) (1.3) Effects of movements in foreign exchange rates 0.1 Acquisitions through business combinations 0.1 Addition charged against result Write offs (0.5) (0.2) Balance at year end Besides specific allowances, the Group believes that, based on historic rates, no impairment allowance is necessary in respect of trade receivables not past due or past due by up to 30 days. The allowance amounts relating to trade receivables are used to record impairment losses until the Group is satisfied that no recovery of the amount owing is possible. At that point the amounts are considered irrecoverable and are written off against the financial asset directly.

99 Financial instruments and risk management continued Capital management Wessanen s financing strategy is built around the following objectives: Appropriate access to debt and equity markets Sufficient capacity to fund add-on acquisitions Optimal weighted average cost of capital Mitigating financial risks The capital structure of the Company balances these objectives in order to meet the Company s strategic and day-to-day needs. In the long term, our targeted net debt level is aimed to be below 2.5 times consolidated EBITDAE, but our actual net debt levels can be higher or lower depending on acquisitions and divestments, access to capital markets and the timing of cash flows. During the first quarter of 2010, launched an equity offering of up to 6,835,910 newly issued ordinary shares, representing 9.99% of the Company s outstanding share capital. Wessanen used the net proceeds of EUR 17.9 from the offering to strengthen its balance sheet, thereby providing financial flexibility to carry out its strategic and operational plans. Such flexibility was desired regarding the timing of the planned divestment of US based PANOS Brands and the amount and phasing of advertising and promotional spending during the year. The gearing ratio (net debt/shareholders equity) at 31 December 2010 amounted to 16.3% (2009: 116.7%). Fair values versus carrying amounts Fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position are as follows: 31 December December 2009 Carrying amount Fair value Carrying amount Fair value Assets carried at fair value Financial assets available for sale Financial assets designated at fair value through profit & loss Foreign exchange swap contacts used for hedging Total Assets carried at amortised cost Loans and receivables: Long term receivables Trade receivables Other receivables and prepayments Cash and cash equivalents Total Assets carried at cost Investments in equity instruments that do not have a quoted market price 0.1 Liabilities carried at fair value Interest rate swaps used for hedging Forward exchange contracts used for hedging Other forward contracts used for hedging Total Financial statements Liabilities carried at amortised cost Syndicated loans Other long-term loans Finance lease liabilities Trade payables Non-trade payables and accrued expenses Bank overdrafts Total Excluding derivatives, which are shown separately.

100 98 Notes to the consolidated financial statements 26. Financial instruments and risk management continued Fair value of financial assets and liabilities The carrying amounts of cash and cash equivalents, trade and other receivables, accounts payables and bank overdrafts approximate their fair values because of the short-term nature of these instruments. The fair value of lease liabilities is estimated as the present value of future cash flows, discounted at market interest rates for homogeneous lease agreements. The carrying amount of the amounts owed to credit institutions approximate their fair values, as the amounts are floating interest bearing. The fair value of financial instruments, including interest rate swaps, has been determined by Wessanen using available market information and appropriate valuation methods (level 2 only). Level 2 inputs other than quoted prices that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e., derived from prices). 27. Commitments and contingencies Operating lease commitments Non-cancellable operating leases are payable as follows: 31 December December 2009 Continuing companies Less than 1 year Between 1 and 5 years More than 5 years Total non-cancellable operating lease commitments Discontinued companies Less than 1 year 11.6 Between 1 and 5 years 27.0 More than 5 years Total non-cancellable operating lease commitments 38.6

101 Commitments and contingencies continued Wessanen leases a number of office, warehouse and factory facilities, cars and computer hardware under operating leases. The leases typically run between 3 and 15 years, with an option to renew after that date. Lease payments are increased annually to reflect market rentals. None of the leases include contingent rentals. Wessanen does, in principle, not act as a lessor. During the year ended 31 December 2010, EUR 8.9 (2009: EUR 7.1) was recognised as an expense in the income statement of continuing operations and EUR 1.9 (2009: EUR 9.7) in the income statement of discontinued operations in respect of operating leases. Capital commitments Commitments to purchase property, plant and equipment as at 31 December 2010 amounted to EUR 1.3 (2009: EUR 2.2). As at 31 December 2010 there are no commitments to acquire intangible assets (2009: EUR 0.0). Purchase commitments Wessanen has purchase commitments with vendors in the ordinary course of business at market-related terms. Guarantees Wessanen has outstanding letters of credit to third parties amounting to EUR 61.9 as at 31 December 2010 (2009: EUR 61.5), including guarantees maintained in favor of the divested operation Tree of Life, Inc. in the amount of USD 87.9 (2009: USD 88.5). These guarantees primarily relate to workers compensation insurers (maintained until the claims covered by those policies expire), a lender to an associate of Tree of Life, Inc. (maintained for three years) and lease obligations (maintained for a maximum period of up to eleven years). Kehe Food Distributors, Inc. has idemnified Wessanen for calls of third parties under such guarantees in favor of the divested operation Tree of Life, Inc. Bank guarantees have been issued for EUR 0.8 (2009: EUR 0.5). For guarantees provided, a provision has been made of EUR 1.9 as at 31 December 2010 (2009: EUR 1.4). Contingencies Wessanen is subject to certain other loss contingencies arising from claims by various parties. Management believes that any reasonable possible loss related to such claims and possible litigation is properly provided for. These estimates and associated assumptions are based on management s best knowledge of current events and actions. 28. Related parties Wessanen has a related party relationship with its subsidiaries and its associates (see Note 31) and key management. Furthermore pension funds in the Netherlands are related parties. Transactions with key management are described in Notes 8 and 9. In 2010 no transactions were entered into with related parties, other than described above. 29. Principal auditor s remuneration Principal auditor s remuneration for audit and other services incurred (for continuing and discontinued operations) can be specified as follows: Deloitte Accountants B.V. 1,2 Other Deloitte Network KPMG Accountants Other KPMG Total N.V. 3 Network Total Audit of annual accounts Other assurance services Tax advisory services Other non-audit services Total principal auditor s remuneration At the Annual General Meeting of Shareholders of 14 April 2010 Deloitte was appointed as the external auditor to audit Wessanen s 2010 financial statements. 2 Deloitte Accountants B.V., the Netherlands 3 KPMG Accountants N.V., the Netherlands Financial statements The decrease in principal auditor s remuneration in respect of the audit of the annual accounts is partly the result of the divestment of the discontinued operations (See Note 12).

102 100 Notes to the consolidated financial statements 30. Cash flow The following table presents a specification of changes in working capital of continuing operations: Inventories Trade receivables Other receivables and prepayments Trade payables (11.4) Non-trade payables and accrued expenses 0.7 (9.7) Total changes in working capital The following table presents a reconciliation of the change in cash and cash equivalents (net of bank overdrafts) as presented in the balance sheet to the net cash flow from operating, investing and financing activities in the period: Cash and cash equivalents of continuing operations at beginning of year Cash and cash equivalents related to discontinued operations at beginning of year 21.5 Cash and cash equivalents at beginning of year, including discontinued operations Net cash from operating, investing and financing activities (35.2) 16.0 Effect of exchange rate differences on cash and cash equivalents 1.2 (0.3) Cash and cash equivalents at year end Cash and cash equivalents related to asset held for sale at year end (0.1) Cash and cash equivalents related to discontinued operations at year end (21.5) Cash and cash equivalents of continuing operations at year end

103 List of subsidiaries and associates The following are Wessanen s significant subsidiaries, associates and holding companies as at 31 December Country of incorporation Ownership interest (%) 2010 Ownership interest (%) 2009 Continuing operations Subsidiaries Beckers Benelux BV the Netherlands Natudis Nederland BV the Netherlands Kroon BV 1 the Netherlands Favory Convenience Food Group BV the Netherlands Hagor NV Belgium Allos GmbH Germany Tartex + Dr. Ritter GmbH Germany Cosa Naturprodukte GmbH Germany Distriborg Groupe SA France Bio-Distrifrais-Chantenat SAS France R. Bonneterre SAS France Laboratoire Kalisterra SAS France Distriborg France SAS France Kallo Foods Ltd. United Kingdom Tree of Life UK Ltd. 2 United Kingdom Bio S.L.Y.M. S.r.l. Italy American Beverage Corporation United States Holding companies Wessanen Nederland Holding BV the Netherlands Wessanen Finance BV the Netherlands Wessanen Europe BV the Netherlands Wessanen Beteiligungs GmbH Germany Wessanen Italia S.r.l. Italy Wessanen France Holding S.A.S.U. France Wessanen Great Britain Holdings Ltd. United Kingdom Wessanen USA Inc. United States Discontinued operations Subsidiaries Tree of Life, Inc. 3 United States PANOS Brands LLC 4 United States Associates World Finer Foods 3 United States 45.2 Fifty-Fifty 3 United States Acquired as per 1 April Classified as held for sale as per 31 December Divested as per 29 January Divested as per 17 December Financial statements

104 102 Income statement of the Company In EUR millions Income from subsidiaries and associates, net of income tax (1.5) (215.0) Other income and expenses, net of income tax (4.6) (4.7) Profit/(loss) for the period (6.1) (219.7)

105 Balance sheet of the Company 103 (before appropriation of current year s result) 31 December December 2009 In EUR millions Notes Assets Financial assets Current assets Total assets Shareholders equity Share capital Share premium Reserve for own shares (3.0) (6.0) Legal reserves (22.7) (37.8) Retained earnings Profit/(loss) for the period (6.1) (219.7) Total shareholders equity Current liabilities Total shareholders equity and liabilities Financial statements

106 104 Notes to the financial statements of the Company 1. Principles of valuation and income determination 1.1 General The Company financial statements are part of the 2010 financial statements of Wessanen. With reference to the Company income statement of Wessanen, use has been made of the exemption pursuant to section 402, Title 9, Book 2 of the Netherlands Civil Code. In accordance with Section 379 and 414, Title 9, Book 2 of the Netherlands Civil Code, a list of consolidated group companies and non-consolidated associates will be deposited at the Trade Register of the Amsterdam Chamber of Commerce, together with the financial statements. 1.2 Principles for the measurement of assets and liabilities and the determination of the result For establishing the principles for the recognition and measurement of assets and liabilities and determination of the result for its Company financial statements, Wessanen makes use of the option provided in section 362, Title 9, Book 2 of the Netherlands Civil Code. This means that the principles for the recognition and measurement of assets and liabilities and determination of the result (hereinafter referred to as principles for recognition and measurement) of the Company financial statements of Wessanen are the same as those applied for the consolidated financial statements (see Note 3 of the consolidated financial statements). Participating interests (subsidiaries and associates), over which significant influence is exercised, are stated on the basis of equity method. The share in the result of participating interests consists of the share of the Group in the result of these participating interests. The consolidated financial statements are prepared in accordance with International Financial Reporting Standards Board as adopted by the European Union. Results on transactions, where the transfer of assets and liabilities between the Group and its participating interests and mutually between participating interests themselves, are not incorporated insofar as they can be deemed to be unrealised. 2. Financial assets 31 December December 2009 Balance at beginning of year Effect of movements in foreign exchange Cash flow hedges Income from subsidiaries and associates, net of income tax (1.5) (215.0) Balance at year end Financial assets include investments in subsidiaries. 3. Current assets 31 December December 2009 Income tax receivable Cash and cash equivalents 0.8 Total current assets Shareholders equity For a specification of shareholders equity, see the consolidated statement of changes in equity (page 62) and Note 21 to the consolidated financial statements. Legal reserves (translation reserve, hedging reserve and other legal reserves) are not available for distribution to the Company s equity holders. If the translation reserve or hedging reserve has a negative balance, distribution to the Company s equity holders is restricted to the extent of the negative balance. 5. Current liabilities 31 December December 2009 Payables to subsidiaries Trade and other payables Total current liabilities The current liabilities are liabilities that mature within one year.

107 Commitments and contingencies The Company has assumed liability for debts of participating interests, up to a total of EUR 35.0 (2009: EUR 239.6). The related guaranteed debts are included in the consolidated statement of financial position for an amount of EUR 35.0 (2009: EUR 239.6). The Company is part of the fiscal unity of Wessanen. Based on this, the Company is liable for the tax liability of the fiscal unity in the Netherlands as a whole. The Company has also assumed liability for the Dutch Group companies of which the financial statements have been included in the consolidated financial statements, as provided for in Section 403, sub 1, Title 9, Book 2 of the Netherlands Civil Code, except for those companies that are part of the Favory Convenience Food Group. This implies that these Group companies are not required to prepare their financial statements in every respect in accordance with Title 9, Book 2 of the Netherlands Civil Code or to publish these. 7. Employees The Company did not employ any personnel in Amsterdam, 23 February 2011 Supervisory Board F.H.J. Koffrie, Chairman J.G.A.J. Hautvast F. van Oers Executive Board P.H. Merckens, CEO F.E. Eelkman Rooda, CFO Financial statements

108 106 Other information Appropriation of result 2010 The loss for the year 2010 attributable to the equity holders of Wessanen amounted to EUR 6.1 against a loss of EUR in Subsequent events Subsequent to 31 December 2010 no material events occurred that require disclosure. The dividend policy of Wessanen aims to pay out a dividend between 35-45% of its net result, excluding major non-recurring effects. As the 2010 net result of Wessanen, adjusted for non-recurring items, represents a profit, a dividend of EUR 0.05 per share will be proposed during the Annual General Meeting of Shareholders. Dividend proposal A proposal will be submitted to the Annual General Meeting of Shareholders to be held on 19 April 2011 to pay a dividend of EUR 0.05 per share. The dividend will be paid either wholly in cash or in new shares, at the option of the shareholder, and will be charged to the share premium reserve. Shareholders will be contacted by their bank or agent, with whom on Wednesday 27 April 2011 (after closure of the stock exchange) their shares are deposited in order to make the election between a dividend in shares or in cash (record date). The end date of the election period, when shareholders can determine their election of dividend payment in shares or in cash, is 12 May 2011 at CET. On 12 May 2011 after closure of the election period the Executive Board will determine the exchange ratio, on the basis of the daily volume weighted average share price during the period of 6 May 2011 up to and including 12 May 2011, the number of dividend rights of shares that give title to one share of nominal value EUR The new shares will be entitled to the dividend over the financial year 2011 and the following years. As of Thursday, 21 April 2011 the shares will be traded ex-dividend. No trading in dividend rights will take place. Issue of the new shares in accordance with this proposal (in the case of stock dividend) respectively payment of the cash amount will be effected as from Thursday 16 May 2011.

109 Independent auditor s report 107 To: Annual General Meeting of Shareholders of Royal Wessanen nv Report on the financial statements We have audited the accompanying financial statements for the year ended 31 December 2010 of Royal Wessanen nv ( the Company ), Amsterdam. The financial statements include the consolidated financial statements and the company financial statements. The consolidated financial statements comprise the consolidated statement of financial position as at 31 December 2010, the consolidated income statement, the consolidated statement of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of the significant accounting policies and other explanatory information. The company financial statements comprise the company balance sheet as at 31 December 2010, the company income statement for the year then ended and the notes, comprising a summary of the accounting policies and other explanatory information. Management s responsibility Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Dutch Civil Code, and for the preparation of the Report of the Executive Board in accordance with Part 9 of Book 2 of the Dutch Civil Code. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error. Opinion with respect to the company financial statements In our opinion, the company financial statements give a true and fair view of the financial position of Royal Wessanen nv, Amsterdam as at 31 December 2010 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code. Report on other legal and regulatory requirements Pursuant to the legal requirement under Section 2:393 sub 5 at e and f of the Dutch Civil Code, we have no deficiencies to report as a result of our examination whether the Report of the Executive Board, including the pages 14 to 48, to the extent we can assess, has been prepared in accordance with Part 9 of Book 2 of this Code, and whether the information as required under Section 2:392 sub 1 at b-h has been annexed. Further we report that the Report of the Executive Board, to the extent we can assess, is consistent with the financial statements as required by Section 2:391 sub 4 of the Dutch Civil Code. Amsterdam, 23 February 2011 Deloitte Accountants B.V. P.J.M. Peerlings Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. Financial statements We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion with respect to the consolidated financial statements In our opinion, the consolidated financial statements give a true and fair view of the financial position of Royal Wessanen nv, Amsterdam as at 31 December 2010, and of its result and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Dutch Civil Code.

110

111 Additional information 109 Financial summary Shareholder information 112 Additional information

112 110 Financial summary Condensed consolidated income statement In millions euro, unless stated otherwise (adjusted for comparison purposes) Revenue Operating profit 5.3 (44.4) Net financing costs (8.3) (19.9) (9.8) (8.5) (10.5) Share in results of associates Profit/(loss) before tax (3.0) (64.3) Income tax expense (0.2) (69.0) (8.2) (17.6) 2.0 Profit/(loss) after income tax from continuing companies (3.2) (133.3) Profit/(loss) from discontinued operations, net of income tax 1.7 (88.9) (9.6) Profit/(loss) from divestment discontinued operations, net of income tax (3.5) Profit/(loss) for the period (5.0) (221.6) Attributable to non-controlling interests 1.1 (1.9) Profit/(loss) for the period attributable to equity holders of Wessanen (6.1) (219.7) Profit/(loss) for the period attributable to equity holders of Wessanen as a percentage of equity attributable to equity holders of Wessanen 2 (3.5)% (146.6)% 8.4% 14.3% 8.6% 1 Comparative figures have been adjusted from amounts previously reported to reflect the effect of discontinued operations. 2 For 2007, 2008, 2009 and 2010 based on profit for the period; for 2006 based on profit for the period before amortisation of goodwill and before exceptional items. Revenue (in EUR millions) Profit/(loss) for the period (in EUR millions) (5.0) (221.6) Operating profit (in EUR millions) (44.4)

113 111 Condensed consolidated statement of financial position In millions euro, unless stated otherwise (adjusted for comparison purposes) Non-current assets Current assets Current liabilities 1 (137.2) (214.3) (254.4) (242.1) (271.3) Invested capital Financed by: Total equity Provisions Employee benefits Deferred tax liabilities Non-current interest-bearing loans and borrowings Current interest-bearing loans and borrowings Total equity attributable to equity holders of Wessanen as a percentage of total assets 45.1% 23.5% 38.5% 44.1% 49.4% Profit/(loss) for the period attributable to equity holders of Wessanen per share (in EUR) 2 (0.08) (3.25) Excluding short-term finance and current provisions. 2 For 2007, 2008, 2009 and 2010 based on profit for the period; for 2006 based on profit for the period before amortisation of goodwill and before exceptional items. Invested capital (in EUR millions) Total equity (in EUR millions) Additional information

114 112 Shareholder information V*$*30$%&3"449*06#=&>9:&$360"*)&$:(&;"39)(1&"*&$*1&"9:& )049%6$*("9)&5:"+0)0"*&";&0*;":4$60"*&6"&$%%&)6$<(7"%1(:)= Disclosure / website In principle, all results announcements as well as press releases, are published before the market of Euronext Amsterdam opens. All results announcements, as well as any other major announcements, are accompanied by a conference call and/or meeting for the professional investment community. All others interested in these meetings and/or conference calls can listen to a simultaneous audio webcast, to be accessed via. Furthermore, all presentations made to groups of investors are published at the same time on our website. Wessanen adheres to a Disclosure Policy, which is posted on its website. Investor relations Wessanen is engaged in an active dialogue with its shareholders. During 2010 members of the Executive Board of Wessanen had regular contact with investors and analysts. The Company attended broker conferences of KBC, ING and Kempen and hosted various roadshows to meet institutional investors in Europe and the United States (e.g. Amsterdam, London, Paris, Copenhagen, Helsinki, New York, Boston). In 2011 the Company will, again, attend various investor conferences and host roadshows as an integral part of its investor relations policy. Listing information Royal Wessanen nv has been listed on the Amsterdam stock exchange since September The capital structure consists of one class of stocks, i.e. voting shares with a nominal value of EUR 1.00 per share. These shares are listed on the NYSE Euronext (Amsterdam) Stock Exchange and are included, amongst other indices, in the AMX and Next 150 indices. All shares outstanding have equal rights and can be traded freely without any restriction. In addition, Wessanen share options are traded on the NYSE Euronext Amsterdam derivative exchange. Prevention of misuse of inside information Wessanen considers the prevention of misuse of insider information essential in the relationship to all stakeholders. The Company has in place an Insider Trading Policy applicable to management; the Company Code also provides against insider trading. Ending of American Depository Receipts (ADR) programme Since 1988, Wessanen has sponsored a programme of ADRs. The benefits of the programme have decreased over time, especially since the divestment of Tree of Life, Inc. and Wessanen s focus on the European organic food markets. In addition, the average daily trading volume of shares represented by ADRs has been relatively small and the majority of shares held by US domiciled investors in recent years was acquired through NYSE Euronext Amsterdam. We therefore terminated the ADR programme in Equity offering 2010 During the first quarter of 2010, Wessanen launched an equity offering of 6,835,910 newly issued ordinary shares, representing 9.99% of the Company s outstanding share capital. The offer price was EUR Wessanen used the net proceeds of EUR 17.9 million from the offering to strengthen its balance sheet, thereby providing financial flexibility to carry out its strategic plans. Distribution of shares Since Wessanen s ordinary shares are mainly in bearer form, analyses of shareholdings are based on estimates from market sources. The pie charts below illustrate the estimated distribution of ownership of Wessanen shares by type of investor and by country of origin as a percentage of total shares outstanding (excluding treasury shares) in This is based on data provided by depository banks as of the end of December 2010.

115 113 Share ownership geographical breakdown ! Netherlands 63% 69%!" Belgium/Luxembourg 3% 9%!" Nordics 6% 5%!" Rest of Europe 5% 5%!" USA 22% 2%!" Rest of World 1% 1%!" Unidentified 0% 9% Coverage by brokers and banks During 2010, 11 brokers, all based in the Benelux, covered Wessanen. Most of these published research on a regular basis, either around the publication of our quarterly reporting or updating the market after a news event like our strategic update in January, the announcement of Piet Hein Merckens as new CEO or the divestment of Tree of Life, Inc. In addition, numerous brokers included Wessanen in sector and/or country reports or when addressing themes, like raw material and input cost movements. A relatively limited number of reports has been published on organic food, including its characteristics and size. Broker price target and recommendation as at 31 January 2011 Share ownership institutional vs. private ! Private 44% 28%!" Institutional 56% 63%!" Unidentified 0% 9% (in EUR) Broker Price target Recommendation ABN Amro 2.80 Hold Cheuvreux 2.50 Underperform ING 2.75 Hold KBC 3.30 Hold Kempen 3.10 Hold Kepler 2.50 Underperform Petercam 3.25 Hold Rabo 2.50 Underperform RBS 2.93 Hold SNS 2.50 Underperform Theodoor Gilissen 2.50 Sell Share ownership Royal Wessanen nv 2010 Private Institutional Total Netherlands 43% 20% 63% Belgium/Luxembourg 1% 2% 3% Nordics 0% 6% 6% Rest of Europe 0% 5% 5% USA 0% 22% 22% Rest of the World 0% 1% 1% Unidentified 0% 0% 0% Total 44% 56% 100% Movement of EPS consensus Major shareholders In accordance with the Act on the Disclosure of Influence over Listed Companies (1991) the Company believes it had the following major shareholders as at 31 December 2010: Delta Partners LLC (15-20%) (including Prism Offshore Fund, Ltd) Sparinvest Holding (5-10%) Average broker target price during 2010 Average target price Share price Additional information

116 114 Shareholder information Market capitalisation Year High Low Year end Net debt year end Enterprise value year end Market capitalisation , Dividend policy and 2010 dividend proposal As a policy, Wessanen aims to pay out a dividend of between 35-45% of its net result, excluding major non-recurring effects. No interim dividends will be paid. As the 2010 net result of Wessanen, adjusted for non-recurring items, represents a profit, a dividend of EUR 0.05 per share will be proposed to the Annual General Meeting of Shareholders (AGM). Shareholders will have the option to declare the dividend in cash or in stock. The proposed dividend for a financial year must be approved by the AGM, which is usually held in April of the following financial year. Dividend proposals shall be made by the Executive Board with approval from the Supervisory Board and should be in line with the dividend policy. Dividend payments are only allowed to the extent that the shareholders equity is in excess of the sum of the paid-up capital and any reserves required under Dutch law dividend timetable 19 April 2011 Annual General Meeting of Shareholders 20 April 2011 CUM date 21 April 2011 Ex-dividend date 27 April 2011 Record date 28 April 12 May 2011 Election period for dividend in cash or in shares (15:00 CET) 6 May 12 May 2011 Period for determination of the exchange ratio 12 May 2011 Announcement of the exchange ratio (after closure of Euronext Amsterdam) 16 May 2011 Delivery of new shares and payment of the dividend Key ratios Year Leverage ratio Return on average capital employed 2.0% (14.3)% 11.2% n/a n/a Return on equity 1 (3.5)% (729)% 77% n/a n/a 1 Continuing operations only Key figures Year Revenue Operating result (44.4) Net profit (5.0) (221.6) Net debt Average number of employees 1 2,276 2,261 2,383 n/a n/a 1 Continuing operations only Per share data Year Net profit (0.08) (3.25) Dividend % volume traded per exchange in 2010! Euronext 80.9%!" Chi-X 6.1%!" Turquoise 1.3%!" Bats Europe 1%!" OTC 9.1%!" Systematic Internaliser 0.7%!" Dark Venues 0% Source: Fidessa Group PLC Royal Wessanen trading volume 2010 (Euronext) 5,000,000 4,000,000 3,000,000 2,000,000 1,000, Jan 1 July 31 Dec

117 115 Royal Wessanen share price 2010 versus AMX in 2010 WES ( = 4.23) AMX reweighted Jan 1 Apr 1 July 1 Oct 31 Dec Peer group In 2010 the peer group was changed in order to better reflect the transition of Wessanen to a focused organic food company. The peer group consists of: Bonduelle, Bongrain, CSM, Ebro Puleva, Fleury Michon, Lotus Bakeries, Northern Foods, Nutreco, Premier Foods, Sligro and Wessanen. The performance of all peers has been indexed starting 4 January Relative 2010 performance peer group Nutreco 144 Northern Foods 90 CSM 140 Bonduelle 89 Lotus Bakeries 121 Fleury Michon 88 Bongrain 116 Wessanen 70 Sligro 97 Premier Foods 54 Ebro Puleva 90 Royal Wessanen share price Peer group Nutreco CSM Bonduelle Bongrain Premier Foods Wessanen Jan 01 Apr 01.Jul 01 Oct 01 Dec Development of the share price Year End High Low Average daily volume traded , , , , ,879 Key dates 19 April 2011 Annual General Meeting of Shareholders 28 April 2011 Publication of the first quarter 2011 results 28 July 2011 Publication of the second quarter 2011 results 27 October 2011 Publication of the third quarter 2011 results Corporate Communications and Investor Relations Carl Hoyer, VP Corporate Communications Phone: +31 (0) [email protected] [email protected] Additional information

118 Designed and produced by Addison, London (UK) Board and retail photography by Frank van Delft, Utrecht (the Netherlands) Printed by Drukkerij Aeroprint, Ouderkerk a/d Amstel (the Netherlands) FSC LOGO TO BE ADDED Cautionary statement regarding forward-looking statements This Annual Report may contain forward-looking statements. These are defined as statements not being historical facts. Forward-looking statements include (but are not limited to) statements expressing or implying Royal Wessanen nv s beliefs, expectations, intentions, forecasts, estimates or predictions (and the underlying assumptions). Forward-looking statements necessarily involve uncertainties and risks. The actual results or situations may therefore differ materially from those expressed or implied in any forward-looking statements. Those differences may be caused by various factors, including but not limited to, macro-economic developments, regulator and legal changes, market developments, competitive behaviour, currency developments, the ability to retain key employees, and unexpected changes in the operational environment. Additional factors that could cause actual results or situations to differ materially include, but are not limited to, those disclosed under risk factors. Any forward-looking statements in this Annual Report are based on information available to the management on 23 February Royal Wessanen nv assumes no obligations to publicly update or revise any forward-looking statements in this Annual Report whether as a result of new information, future events or otherwise, other than as required by law or regulation.

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120 Atlas Arena, Azië building Hoogoorddreef BA Amsterdam Zuidoost The Netherlands Phone: +31 (0) [email protected]!!!"!#$$%&#&"'()